Just as you wouldn’t jump in your car and head for a brand new destination without a road map, you shouldn’t start a business without a plan detailing where you’re going and how you’re going to get there. One page is enough to expand it from scribbles on a napkin to a viable business plan you can show investors.
1. Your vision
What will your product or business look like when it’s successful? This section should only be two or three sentences, but they should be the most passionate and confident sentences you’ve ever written if you want everyone to understand your goal and feel compelled to get involved in helping you reach it.
2. Your mission
The first section has convinced everyone your idea is brilliant; now you need to back it up with some information about how you’re going to do it. Try to answer these questions:
- What customers are you going to target?
- What market issue are you aiming to solve?
- What’s so special about your product?
3. Your objectives
Now you’ve identified your goal and an idea of how to get there, you need to explain your timeframe for doing those things. Fill in these sections in bullet-point form, to be expanded on in the next section:
- What are your weekly goals?
- What are your monthly goals?
- What do you want to have accomplished by the end of the year?
4. Your strategies
Take each of your bullet points above and expand them to a couple of sentences; if you can’t say it that briefly, you may need to revisit how realistic your objectives are. For example:
Objective: Increase visibility
Strategy: Increase visibility by advertising in [the local newspapers.]
5. Your action plan
You know what you need to do, how you’re going to do it, and when you would like to have done it by. Now it’s time for even more detail with exactly when you’re going to do it. To use the same objective as an example:
Objective: Increase visibility
Strategy: Increase visibility by advertising in [the local newspaper.]
Action plan: The deadline to submit an advertisement is 2pm on the 25th. The design/copywriting team should have completed the first draft by the end of the day on the 18th, to allow time for tweaks before submission.
Begin with a short summary of the number of employees you have and your organizational structure; this will help to show that you are a complete business and not just one person with a dream. If there are positions that still need to be filled, mention that they will be filled and when. Continue with the following information, and be prepared to answer any questions about why a certain person was hired:
- Title/Position within the business - are they management? Which department are they in?
- A one or two sentence bio proving why they were chosen
- Costs - how much will you be paying each person (or department, in a bigger business)? Are the salaries justified?
Now you have a fully fleshed plan on what you want to do and how you’re going to do it, you need to translate it into the numbers your investors want to see. A good business plan will forecast the financials for the first one to three years.
A financial plan usually includes:
- Sales forecast. A brief statement of how much you expect to sell, who to, and your sale strategies.
- Profit & Loss Statement/Income Statement. The profit is the sales minus the cost of sales; the losses are costs, salaries, expenses, taxes and interest. You may choose to include the sales forecast here.
- Cash Flow Statement. Profits is the money you make: cash is the money you raise or borrow to get started or use in case of sales dry spells. It flows in from investors and out when you start paying them back.
- Balance sheet. Once you know your profits and loss and cash flow, you can work out a balance sheet which shows your financial situation at any given time: Start with your assets and take away your liabilities.
More detailed financial plans may also include:
- Business ratios. These use the income statement, cash flow statement and balance sheet and to compare you to similar businesses. There are many different types of ratio to choose from, but it’s good to include some profitability ratios (return on assets, return on investment) and some liquidity ratios (debt to equity, working capital.)
- Break-even analysis. Your break-even point is how much you need to sell in order to make back what you’ve paid in costs. Take your per-unit sale price (how much you get for selling one item), the per-unit cost (how much you pay to make it and get it to the customer) and your fixed costs (such as rent or salaries) and put them into this calculator.
- Market forecast. Looking to the future, how many potential customers might there be beyond what you’ve already taken into account? How will changes in the market affect you?
So, there are the seven simple sections to take you from a napkin saying "I had a great idea!" to a complete plan saying "here’s how I’m going to make my great idea happen!" Have you written one? Is there anything missing? Let us know in the comments section below.