What is a Business Plan and How to Create One

What is a Business Plan Anyway?

As defined by Wikipedia, a business plan is “a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals”. This is great, but doesn’t tell us much about what it truly is and how you end up with a plan.

Cheryl describes it as a process, which really resonated with me. She said, “The process is a series of taking your thoughts and visions and applying it to paper to basically give you a fast check to say, ‘Is this really a great idea to keep moving forward with? Is this something I should do? If I can do it, how can I make it work?”

Given that it is a “fast check”, it doesn’t need to be so formal to start. Cheryl indicated that she has created many a plan for her clients based off of scribbles or business journals. She recommends, when you’re just starting to think about forming a business you may want to dedicate a notebook or journal to jot down all the thoughts you have about your business. this sparked my memory, as I recalled that some of the greatest companies out there have started by a doodle on the back of a napkin. Companies such as Genentech, who’s founders spent some time doodling on their napkins over drinks and hoagies which they later turned into a formal business plan and a flourishing biotech business.

Why Do You Need a Business Plan?

Aside from it being a litmus test to see if your business venture is even feasible, a business plan is a roadmap to help you get from where you are to where you want to be. And, as Cheryl indicated, unless you’ve never planned one thing in your life (i.e., a party, vacation, etc.) you need a business plan. Also, as you flesh out your plan, it will help you determine, “how great an idea is and how bad it is in certain places and what you need to do to fix it” Cheryl says.

A business plan will also help you from a financial aspect. From the initial funding stages to determining when you will break even and bring in profit, the business plan can provide you with a timeline a well as a way to course correct when needed. Cheryl also notes, depending on who needs to see your plan, the detail may vary, but the basic structure will remain the same.

What is the General Structure of the Business Plan?

There is no right or wrong, rather structure is typically dictated by whomever needs it. If you are self-funding, then you want to make sure you have the market analysis, a break-even analysis, etc. If you are getting funding, then the bank, VC or family member may require other information. That said, here is a rough outline of the recommended components of a business plan, detailed further in the tools section under “Business Plan Outline” on Inc.com.

  • Executive Summary
  • Vision
  • Market Analysis
  • Competitive Analysis
  • Strategy
  • Products/Services
  • Marketing and Sales
  • Operations
  • Financials

How Often Should I Revise My Plan?

A business plan should be reviewed and updated at specified intervals. Whether it is quarterly or twice a year, this kind of review will help you determine if you are still on course and will help you identify early warnings if you are not. Remember, there is a reason why large organizations have strategic business reviews and quarterly assessments, it helps to ensure the plan is being executed and allows for quick changes based on external and internal impacts.

Also, by reviewing your business plan in regular intervals, it ensures that you are keeping focused and strategic with your time and money.

In Summary – Business Plans:

  1. Will help you to ensure you have a sound business idea and appropriate back-up plans to make it all happen.
  2. Provide a roadmap to help you get from point A to point B.
  3. Help you course correct, especially when you encounter unexpected roadblocks or detours.
  4. Start with a doodle or a journal.
  5. Vary in length and depth depending on your needs.

And, if you’re still not excited to create your own business plan, hire someone like Cheryl Isaac who can guide you through the process of creating one, or will create one for you. For more information on her services, please see the resource box below.

If you are serious about starting your own business or wonder how to get your business fully up and running, take time to create or update your business plan today.

Meet Our Expert:

Cheryl Isaac is a former banker-turned-entrepreneur who now focuses her efforts on helping people plan for business. With almost a decade of experience as a banker, she once read tons of business plans and was taught the “secrets” of proper business structure from one of the most popular sources of funding. Now, her days are spent revealing those tips to start-up and small business owners. She is the owner of Isaac Business Services; A Business Start-up Company that writes, teaches, and advises about business planning. She is also the Founder of the online business planning center; The 12MonthBizPlan.com and the business plan workshop tour; The 48 Hour Business Plan Challenge. Cheryl combines her love of writing with her passion for business in her soon-to-be released book, “A Different Business – 7 Easy Steps to Starting & Planning a Business Around Your Purpose”.

You can find more of her work at her newly launched entrepreneurial business club at www.adifferentbusiness.com.

Starting a Business?

It is not difficult to start a business! But it is difficult to start a profitable business that survives beyond the first year!

Research suggests that businesses that fail in the first year do so either due to a lack of commitment on the entrepreneurs part or the business idea was doomed from the start.

Lack of commitment

The entrepreneur starts a business but they do not believe totally in the concept, product or service and they do not quite put the hours in to ensure the business is a success. Perhaps they fell into running their own business because of redundancy but would rather be employed in a managerial position in a large organization. You quite often see second generation businesses fail for similar reasons. The offspring of the original entrepreneur do not have the same commitment or enthusiasm and the business suffers a slow death. If you do not believe in the product or service you are offering it is unlikely your customers will. It does not have to be the best product out there, it just has to be the best product or service in the location or market sector. If you do not believe in the product or service change it until you do.

Bad idea from the start

Many businesses are doomed from the start. The entrepreneur gets blinded by their idea and does not listen to reason and proceeds without properly thinking the business concept through.

An example may be opening a bar when many are closing down in the same area. Unless it is a new concept in bars then it is unlikely that yours would succeed while the rest fail. So do not try think of another area to go into.

Opening a shop selling CDs when the music buying public get their music on line.

The entrepreneur somehow believes that their business model is different when in reality the concept has been proven not to work time and time again.

There was a time when many farmers wanted to open golf courses. They believed they would make more money from the land with a course than from farming. In reality so many farmers had opened golf courses that there were not enough customers.

Warning: Do not expect to get good business advice from lawyers and accountants. They are not paid to give advice on whether the idea is good or bad and will usually benefit whether your business is a success or it fails.

How do you get over these two potential stumbling blocks?

Look deep into your mind and thoughts and decide whether you would be happy running a business even if it means long hours, and the grass actually being greener on the other side of the fence, but that you at least are your own boss. In many cases that has to be compensation enough since often the employed earn more than the entrepreneurs. Are you starting a business for the right reasons?

How to avoid starting a business that is doomed to failure is slightly harder but you can minimize the risk by:

  • Research
  • Talking to friends and other business owners
  • Appreciating that you may not be successful first time around
  • Make sure you have access to resources to give the business a chance
  • Try to pick a growth sector like for example internet sales, energy conservation, security as opposed to areas where business are leaving the market
  • Be prepared to come up with another business idea

You can start a business in a declining sector and indeed be successful but your business plan will need to reflect this. In 2009 the business sectors with the highest bankruptcy rates were: Builders Restaurants Shops

Starting a business is a long term commitment. One can sell a business but it takes time, sometimes years and if it has only just started up you are unlikely to get back your original investment.

5 Reasons Why Starting a Home Based Business Model is Better Than the Traditional Business Model

Starting a home based business is very different from the traditional marketing business. In order to understand the nature of both businesses we can make a smart comparison below. The five reasons why a home business model is better than the traditional business are listed below.

1. Lower running costs and overheads: By starting a home based business making money from home is more convenient and needs fewer resources. To begin with an online business, you only need a computer and internet access. Traditional business need more resources and hard work along with a separate office or place to deal with your clients. It is very clear that setting up the traditional business, expenses involved are high. Where as, earning money from starting a home based business is inexpensive and needs no hiring of employees, paying insurance or paying rent for space or an office.

2. Storage space: Starting a home based business only needs space for a system and internet connection as compared to traditional business that requires storage to keep substantial stocks of the products. This will also include rental of the storage space, money paid to the employee, loading and unloading of the boxes and stock, shelving and covering other logistical costs. Starting a home based business using affiliate marketing concept, the product is delivered to your customers through shipments from the merchants. Stock of any inventory is not required at all and this saves a huge cost again.

3. Easy expansion of your business: An affiliate-marketer starting a home based business can easily set up multiple businesses. A substantial amount of money can be earned by working at various different niches. Once the website starts bringing in a regular income less maintenance will be required giving you more time to start another one. With a traditional business, you are generally locked into one theme and the logistics required to expand your business are not only complicated but also quite expensive as lot of money is required for the expansion.

4. A bigger horizon: The advantage of starting a home based business offers a bigger horizon to earn money at an international platform. Not many traditional businesses manage to grow at a worldwide scale and most of them remain local to their marketplace. Online affiliate marketing is run globally because most of your buyers are internet users and purchases the products you are offering online.

5. 24 hours / 7 days a week open for business: Even when you are sleeping or away on a day trip, you will be making money with affiliate marketing by starting a home based business. There is a learning curve to every business but making money online is much faster, cheaper and easier than traditional methods of business. Affiliate marketers sell products online in less than expected and short time span as compared to traditional off-line business in which the selling target is difficult to achieve and needs long time. Affiliate marketing business is open 24 hours 7 days a week and never shut down, therefore, it brings you more opportunities to have more clients to make more money than traditionally.