If you’re in business or considering starting a business you’ve no doubt heard of the business plan. Some view the business plan as a long, confusing, and pointless process. Yet many lenders insist that you have a written plan in place before they invest in your business. Key employees in your business as well as partners often rely on a business plan to guide them and their strategic decisions. For many it’s a valuable, if not indispensable guide.
In recent years the business plan has come under scrutiny. Many companies operating using lean start up business models throw the idea of a business plan as a starting point out the door.
I won’t argue the value of a business plan against its alternatives. Instead for this month’s blog series, I will discuss elements of the business plan that every business needs to know, and for those of you still uninterested in the traditional business plan model, offer a few alternatives.
First off, let’s define the elements of a business plan and its basic definition.
A business plan is a calculated future of the business of your venture. It can includes everything from the initial concept, to the marketing, financials, and sales projections. Some detail the step-by-step process and description of how your business will enter the market and succeed. Numbers and predictions are projections based on market research, comparable industry benchmarks, and even historical data.
Let’s take a quick look at the core elements of a business plan broken down into three major parts:
Part One. The Business Concept.
Dictionary.com defines a business concept as “An idea for a business that includes basic information such as the service or product, the target demographic, and a unique selling proposition that gives a company an advantage over competitors. A business concept may involve a new product or simply a novel approach to marketing or delivering an existing product.
Any and every business exists to solve a problem(s). The best business ideas understand how they solve that problem and whom they solve it for in a way that provides a valuable advantage recognized by its customers. If you don’t know why you exist or cannot explain it in 25 words or so, you need to work on your business concept.
To understand how succinct your business concept can be, check out the descriptions of The 14 Best New Business Ideas for 2014 from Business News Daily.
Part Two. Marketing.
Marketing is essential to any business. Without it, how will customers know that you exist?
There are several definitions of marketing, but one of our team’s favorites is borrowed from Randall Chapman at MarketingProfs, “Marketing means solving customers’ problems profitably.”
Marketing goes hand-in-hand with the business concept. It includes the management of the process, objectives, strategies, tactics, benchmarks by which you’ll measure success and more. It includes customer personas and deeper analysis of why you exist, what problems you solve better than any of your competitors. It’s easy to get lost in marketing. There are so many channels for communication and strategies that keep evolving. With marketing you need to not only what you’re going to do today, but what you’ll be looking for tomorrow.
For more, check out Forbes’ The Top 7 Online Marketing Trends That Will Dominate 2014.
Part Three. Financials.
Numbers are usually the entrepreneurs’ least favorite area to work on in their business. Numbers include the balance sheet, profit and loss statements, benchmarks, ratios, cash flow projections, break even analysis, and more. A full set of financial projections are often required by lenders or investors before they even think twice about funding your business or project.
Investors want to know not only how you’ll spend the money, but how you’ll make money with the money they invest in you. This is true of traditional lenders as well.
If you’ve ever watched Shark Tank or 1MillionCups you’ll understand how many entrepreneurs struggle with these three core elements of a business plan – explaining their business model, their marketing pitch, and how a Mark Cuban or Daymond John will make money by investing in the entrepreneur’s small business.
Thinking twice about a business plan? Or are you at least open to looking at business planning tools? Check out Kansas SBDC at FHSU’s online business planning tool or download the Kansas SBDC business plan outline for a step-by-step guide.
Still not interested? Stay tuned for a post on business plan alternatives and more!
Feel free to check out our business plan outline below!
About our Author
Logan Hildebrand is an aspiring intern at the Kansas SBDC and is currently attending Washburn University in pursuit of three degrees: business marketing, management, and entrepreneurship. She has a passion for capturing the awes of consumers through social media and marketing, and has been interning at the state office and the Kansas SBDC at WU for the past 2 years in order to develop her experiences. Adapting to the ever-changing field of marketing and social media is a strength of hers, as well as making a delicious cup of coffee. Her dream is to one day open her own coffee shop and continue her marketing aspirations through that venture. Until then, she will be providing this blog with insightful, interesting, and useful posts to help aid in the development of marketing in businesses that need assistance.