The Myths of Business Planning
One of the biggest misconceptions about building a business plan is that an entrepreneur only needs one if they are seeking external funding. However, one of the critical aspects of starting a business is first determining its feasibility, marketability, and profitability. Many times, even “boot-strapping” a business would be better served if a business plan was in place. So why isn’t a business plan only written for the purpose of raising capital?
In reality, the business plan is a process. While many entrepreneurs go through the mental exercise of planning their business, following a logical structure will ensure that key aspects of the idea are analyzed. While it may take time, it can potentially save money by minimizing the inherit risk in being an entrepreneur. The key is to view the planning process as just that…a process.
The planning process encourages the entrepreneur to step back and take an objective view of the venture. What is gained? Primarily, the planning process identifies the ventures potential strengths, weaknesses, opportunities, and threats. Not only does it allow you to evaluate the venture but it clarifies the financial requirements and potential.
Some of the more common mistakes made in crafting the business plan is to make it too long. Length matters. Anyone reading the plan wants to make sure that the entrepreneur can clearly and concisely describe what the venture is all about, how it will reach its target market, what financing is needed, where is it coming from, what/where is the competition, what advantage does the venture offer the customer, etc. Because entrepreneurs need to be very clear and concise about their idea/venture most collegiate business plan competitions start of as simple “elevator pitch” competitions. One of the more common competitions held at the Collegiate Entrepreneurs Organization’s national conference each year [C-E-O.org] gives students only 90 seconds to make their pitch. This is the amount of time you might be able to capture an executives attention with your idea! Another common error is to assume that there is no competition for the venture. If there is no competition then perhaps there simply isn’t a market. The business plan is also an opportunity for the entrepreneur to confirm that they have the necessary experience, passion, and skill to properly analyze and operate the venture. Finally, during the planning process many entrepreneurs do not make reasonable financial assumptions…which leads to erroneous expectations for the venture. Be honest with financial figures…most times, YOU are the primary stakeholder in the venture.
Format of the Business Plan
Typically, business plans will follow a structure that describes the exact nature of the business. This usually includes:
Yes, the business plan includes a lot of details that might not be handy or readily accessible by the entrepreneur. But that is the point. Completing a business plan ensures that the venture is well thought out. That it…and the competition… has been analyzed properly. It is a lot of work. When it is done though, the entrepreneur should know that their venture is viable…or not. The business plan can prevent financial disaster by providing the objective analysis necessary before committing a significant amount of time or treasure. Of course there a ton of consultants around that you can pay that will do all the planning for you. But then it isn’t your plan anymore. They may be able to supplement your effort or help with certain sections of the plan but don’t cop-out and pay to have it all done. A more reasonable way to get help is to work with the numerous extension offices that major public universities have. Generally, this is a public service. Many local communities also have business development offices that help entrepreneurs go through the business planning process and guide them to funding sources and government grants that are available. Nationally, the U.S. Small Business Administration [SBA.gov] can be a great starting point to find help. The SBA has a great set of tools to find help locally. Additionally, they have business planning templates, information on franchising, buying existing businesses…and it is all FREE! So, no excuses. The business plan is worth the time and effort.
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