Step 3: Create a Business Plan
By The Sloan Brothers - StartupNation

In our experience, the "process" of creating a business plan is as valuable as the end product itself—a document that will provide the priorities, context and sanity you'll need as you start up your business.

Just remember that the most important audience for a business plan is YOU! You'll be forced to be accountable to all of the statements, claims, stats and facts inside of it.

You may also use your business plan as a tool to generate interest from financiers, prospective employees and strategic partners.

We will focus on three aspects of business planning:

  1. The "Defining Dozen" questions you must answer
  2. Key components of a business plan
  3. Creating your business plan

The "Defining Dozen" questions

To write a good plan, you have to know the answers to the "Defining Dozen" questions, which we describe in detail in "StartupNation: Open for Business," our book. Here's the bullet version:

  1. What's your idea?
  2. How does your idea address a need?
  3. What business model suits you best? (see Step 2)
  4. What's unique about what you plan to offer?
  5. What is the market opportunity?
  6. What's your personal role going to be?
  7. Who are the key employees? (see Step 8)
  8. What will customers pay and where/how will they buy?
  9. How much money do you need to start and run the business?
  10. What's the source of your startup capital? (see Step 6)
  11. How will you measure your success?
  12. What are your key milestones?

Once you've answered these questions, you should be prepared to write the actual business plan document.

Key components of a business plan:

Executive Summary:

Covers the most important information within the pages of your plan—the people, the idea, the market, the competition, the strategy, the offering terms—typically no more than two pages long, usually this section is written last.

Business Description:

Breaks down the mission, goals and objectives and the business model.

Market Analysis:

Dives into the needs and wants of potential customers in the market, as well as your competition and the percentage of the market you'll reach.

Marketing and Distribution:

Discusses your strategy to achieve your marketing goals and defines how you get what you offer into customers' hands.

(See Step 9 for branding tips and Step 10 for marketing and PR suggestions)

Personnel:

Describes the management team (existing or future) and any other key personnel that will be instrumental to the business' success.

Exit Strategy:

Puts into words what you see being the ultimate destiny of the company, especially as it may affect financiers and other equity holders in the business.

Financials:

Distills your strategies and assumptions and puts them in the context of how much they'll cost and how much money they'll make you in the course of your business.

We've developed an important instrument to help you forecast and manage you're the financial side of your startup today and into the future. It's something we've coined a cash management report—a simple but powerful time-tested tool that's extremely effective in helping you manage your cash.

It looks at how cash moves in and out of your business on a monthly basis. By preparing a cash management report before the launch of your business, you'll be able to determine if you'll need to raise outside capital, when you'll need it, and how much will be required.

Creating your Business Plan

Your business plan should be concise and neatly formatted (we suggest a Microsoft Word document for the bulk of the plan, with any financial documents as attached spreadsheets in Microsoft Excel), and need not include fancy graphics, flowery language or photos. The easier you make it to read for a potential investor or banker, the better.

If you are the type of person who works better with templates and wizards, there are many business planning software packages available that cost in the neighborhood of $100, as well as a few free online business plan templates.

The advantage to using business planning software is that it offers a step-by-step approach to the process (similar to a "wizard"), and can include sample business plans for specific types of businesses (e.g. restaurants, manufacturing, service, etc.) to help you outline some of the unique requirements or expenses associated with that particular business. It also formats your business plan for you.

One issue you will encounter using business planning software is that it might not provide you the flexibility to convey some of the uniqueness and creativity of the company since it is written through the software system. In this case, you should go back over the business plan and revise the content.

StartupNation provides expert advice, community forums and resources for entrepreneurs starting a small business, from business plan and life plan development to marketing and sales techniques.

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