Writing a business plan can be difficult if you have no idea why you need to write one in the first place. Most people are told they need to write a business plan first before they start their business but many have no idea why they need to do that first if they have never run a business before. Well, that is like putting the cart before the horse,
The reason why all first time entrepreneurs are told to write a business plan is because it is supposed to act as a wake up call to realize what it is you are trying to do before you start hiring people, taking out loans, and filing taxes; all of which are hell to deal with if you have never done any of those things before.
The business plan is meant to wake you up to what is it you are thinking about doing before doing it so that way you can see just how hard it will be to start a business. But I do need to point out with some caution around what it is I’m about to say, successful entrepreneurs who don’t write business plans had well-established networks to work from or they found something that had high demand and value that allowed them to skip that process. Those that started a successful business but never wrote a business plan created a business that had all the right support put in place at the beginning. More than majority of successful entrepreneurs never wrote a business plan because they were too busy working on their company.
Here at the four areas to consider when you are planning to write your business plan
1. Work to Your Audience
This is a problem that all Venture Capitalist’s know too well. They get the same standard pitch that the entrepreneur gave to another investor and once a VC knows you did not do your home work about their firm they are likely not to sign with you if you have nothing to offer that is of any worth to them.
If you are going around asking for money from investors you need to do your homework about what it is they do and the kinds of companies they have invested in. If your business idea is to make special medical devices and the firm’s history of investing covers only areas of education and learning enabled devices then you might want to find another firm that invests in companies like yours otherwise they will have no background knowledge about your field. It’s better to find a firm that matches the type of business your company does.
Before you go and talk with any VC firm try and contact companies that are invested with them currently to find out what they look for in a pitch. This will help you customize your presentation to match the lingo, the style, and information they are looking for. If you can give the VC only the information they need to make a decision on investing that improves your chances of getting funding. Some firms like a presentation to be only 15 minutes and others are looking for just a 5 minute pitch so knowing this will help you before you go in with a standard presentation, plus it keeps you from being surprised when you get cut off.
2. Do Your Homework About your Industry
This is the part that always surprises me about how much effort people put into knowing the industry they are trying to enter. The fields that are the most well covered are restaurants and service industries (plumbers, home construction, etc). There is a section in your business plan that covers how much competition you will have if you plan on going into business. The first thing any investor will ask is, “How do you plan to keep getting new customers?” They need to know how you plan to make money for them in the long run and if you do not have an idea that shows you understand what you are doing they will pass.
There are plenty of websites that provide you will that kind of information. You can start with your city’s chamber of commerce website to do your homework and to find out how many companies are registers in your county. Hoover’s website is one of the better places to learn about industries and companies. You can use that information to include in your presentation because investors need to see that you did your homework and understand just how hard it will be to get above the rest. You may have a great idea but if you’re too naÏve to see how hard it will be to become self-sufficient then your idea will be considered a risky investment. They just need to know you understand all the risks.
3. Understand why you are writing a business plan in the first place
Many people write a business plan and then throw it aside only to struggle with their new business. I have heard many times over that they wrote their business plan but they are not able to make a profit, even after all the loans they have taken out. I, for one, am not a fan of the business plan because I knew I didn’t need one. I was too busy running my company in the beginning to need one, plus I wasn’t planning on raising any money since I created a self-sustaining business model for my company in the beginning.
This is the part that gets a lot of first time entrepreneurs: the business plan. There are tons of “businesses” that have popped up that cater to this market of emerging entrepreneurs needing help writing a business plan and charging thousands of dollars. That’s money that could be used to get your business off the ground if you know what you are doing.
The business plan is your blueprint for how you plan to run your company, get started, manage finances, hire people, expand, and make money. The one thing your business plan won’t do for you is make the right choices and that right there is the difference between those that create successful businesses with or without a business plan and those that don’t make the right choices. No business plan, no matter how well written and researched it is, will replace the person running the company. A person with strong industry connections and natural business know-how has a better chance of successful than someone just starting out with no business background and little industry connections, regardless of whether or not a business plan was written.
Bottom line: If you do not plan on seeking investors and have the business know-how to run your company then writing a business plan is optional. If you plan to seek money without lifting a finger in the beginning and have little experience or background in your industry then you will need to perfect your pitch and presentation if you think that any VC firm will invest in your company. You’d be surprised how many fall into the second one.
4. Business Plans are for Raising Money, including Crowdfunding
The main purpose business plans have come to be used for today is to raise money. It’s basically a document to give to others to show that you did your homework and understand everything it will take to get your company up and running within a certain time frame. I do need to point out that for those that want to do everything they “think” they need to do in order to run a company it helps to write a business plan just so you have it on hand but you will need to update it every so often because industry trends change and so will your business if it plans to keep up.
When you give your business plan to an investor they want to see that it is up-to-date otherwise they might throw you a curveball in your presentation and ask about another company that is trying to do the same thing as you. If you respond that you are not aware of them then that means your research was not extensive enough but their’s was. They look for those little things to find out how much effort you put into writing your business plan because it is a reflection of how hard you will work if they plan to give you their money. If they can see you did not put in enough effort who’s to say that you won’t do the same thing for your company?
Your business plan should also be reflected in any crowdfunding campaign you do. It does not have to include all the same details but people want to see how much effort you put into your product or company. That is why having a well-polished video (same thing as a pitch to investors) helps improve your chances of people investing in you. They want to see that you are keeping your campaign updated with news articles, rewards, stretch goals, and FAQs. There are many campaigns where they included detailed specs of their products, list of awards and more. When you include the same amount of effort you put into your business plan on your crowdfunding campaign then you will see your return in how much people invest in your idea. If you understand how business works then you also understand that how people respond to your idea is the same thing as saying, “the market wants your business.”
When writing any kind of business plan just understand who and why you are writing it in the first place. If you are writing it because your team thinks they need it then write it. But if you do not plan on raising any money then you need to make sure that you understand everything about your business before beginning because once you start it is very difficult to get out of all the legal obligations afterwards, especially paying back any loans.
If you need help finding a business plan template just search “Business Plan” in Microsoft Office and you will have plenty to pick from.
You can also read samples from all different types of businesses in different industries to help give you an idea of how they all differ but also how much work goes into writing a business plan.