According to the Small Business Association, 50% of businesses fail within their first 5 years. You don’t have to be a part of this statistic. The first mistake people make is not writing a business plan and evaluating whether or not their business can be successful, which is why it is so essential that when developing a new business that you write one. Writing a business plans allows for you to evaluate whether people will be willing to buy your product or service, whether you can find a team to help you with your business, and whether it can make a profit in the long run. It increases the chance for success because you will be able to seek out opportunities, avoid potential threats, develop management and marketing plans, and create budgets and pro forma financial statements to estimate the income and cash flow. Finally, a business plan creates the foundation for financial proposals by allowing you to determine the startup money needed and the amount that you believe you could get in profits in order to repay the debt.
What exactly makes up a business plan?
A business plan is made up of several steps, with the first being the “Business Description”. The business description describes what you plan to do and why you plan on starting this business venture. A mission statement or vision statement is a great way to communicate this. Your mission statement should explain why exactly you have created this business and what you plan to achieve with it. A great example includes Apple’s which is, “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad”. In their mission statement, they told us their purpose, the business, and their values. Your mission statement should answer those same three questions and allow for you to have a clear statement that can later be used to create goals and actions from.
After the mission statement, is the business overview. In the business overview, you describe the type of business structure that it is (sole proprietorship, partnership, or corporation) and who the primary owners of it are. Next, you describe exactly what kind of business you are creating (manufacturer, retailer, wholesaler, or service provider). Continuing on under business overview, you will state the history and strengths of the business. The final section under the “Business Description” is product and services. Under product and services, you give a brief description of your product and service, which will get expanded on later on in the business plan.
The second step of a business plan is the “Market Analysis”. While writing this section, you will truly be able to discover whether or not there is a market for your product or service. The market analysis describes the characteristics of the market, and who your targeted customers are. Under the characteristics of the market, you will describe the size, location, and history of your market, expanding on how profitable your business will be in it; thus, you will be proving that your business can be successful in the location that you plan on having it in. For your targeted customer, you will be describing, as specifically as possible, who will be purchasing your product or service and why they will. When writing this part, you need to take into consideration their age, their gender, their income, etc.
About the Author: Lyn Striegel is an attorney in private practice in Chesapeake Beach and Annapolis. Lyn has over thirty years experience in the fields of estate and financial planning and is the author of “Live Secure: Estate and Financial Planning for Women and the Men Who Love Them (2011 ed.).” Nothing in this article constitutes specific legal or financial advice and readers are advised to consult their own counsel.