What are the components of a business plan? Here’s a step-by-step guide to help you put them together to successfully create a tool that will help you win. Especially if you are reviewing a guide to startup accelerators and wondering how to get into them. Creating a business plan is the first essential step to building a successful company. Skipping it can prove incredibly catastrophic later. Even if you’ve already done well in your business in the past, there are many events and circumstances which can also call for you to revisit and redo your business plan. Whether you are just starting out, or are foreseeing challenges, or are already dealing with a crisis, here is your quick step by step guide to the components you’ll need to craft a winning plan.
The Role Of Your Business Plan
If you tried to start a business without a real plan you’ve likely already run into some of the problems that results in. It will always catch up with you. If you are just getting started on your first startup business, a solid plan will help you avoid an enormous amount of pain, and wasted resources, including money and time. Perhaps the most obvious purpose of a business plan is to create a roadmap for taking action. It is to lay out where you are going, what you are going to do, and what you need to do it. It gives you clarity and focus. Which is essential for the survival of any business, no matter how much capital you start off with, or can raise and borrow. Equally important, is working through the process of creating a business plan to be sure you have all your bases covered. It makes you think through all the things you might have missed when first getting inspired with your business idea. Filling in all of the blanks will alert you to the things you didn’t know that you didn’t know, and which are perhaps mostly likely to tank your plans and sabotage all of your good efforts. It will expose critical flaws, and help you solve them in advance.
It is also worth noting that there are a variety of applications for your business plan. This includes:
? For gaining clarity and validating your idea for yourself
? Setting direction and action steps for you and your team
? To help raise capital and find financing for your business
? For recruiting early hires, advisors and cofounders
? Securing business partnerships
? Applying for licenses or leases
The Number One Mistake To Avoid When Creating A Business Plan
A complete and well thought through plan for your business is vital to your success. But, this is also one area which can be one of the most dangerous pitfalls for entrepreneurs as well. It’s one of the most critical components of a business plan and you should understand it well. Not having a plan, is planning to fail. Yet, just as many would-be entrepreneurs and business owners have likely also destroyed their ventures and sealed their fates in advance by getting stuck here. Timing is everything in starting a new business. Or even adapting one to current and evolving conditions for that matter. If you end up spending six months creating a business plan, the chances are very high that someone else will have seized on the same idea, gone to market, raised the money from investors, established their brand and secured the customers. At that point most will need to scrap their plan and move onto another idea. Far too many end up spending years in this cycle, before giving up and just retiring to working on building someone else’s dream as an employee for their rest of their lives. Even if no one else has run with the idea, all of the fundamentals you built your plan on could have changed. At a minimum you will have missed out on months of actually doing business and having the impact you wanted to. Keep in mind that the reality is that while everyone will expect you to have a business plan, no one is going to read through a long plan. They just don’t have the time or attention span. They want to see that you did the work, and have thought it through. Though if you spent months trying to polish it to impress potential investors you’ll probably end up very disappointed.
Deciding On Your Business Idea
It is okay to explore and toy with multiple business ideas or directions for your business before going all in on a new comprehensive plan. Running some small inexpensive tests may prove invaluable in choosing the right angle. It will certainly make your plan stronger, and give you proof to your thesis. This phase can also help you find the optimal sweet spot between an idea with real business potential that can help you reach your goals. It will also help you identify an idea that you can also stay passionate about and committed to for the next decade or longer. Understanding how to do that is one of the components of a business plan.
The Foundation Of Your Business Plan
Aside from any real testing that you’ve been able to conduct so far, the foundation and backbone of your business plan is research. Next to spending too much time in planning and polishing a plan, one of the most significant risks here is not doing enough research. It is mind boggling how many aspiring business owners don’t do much of any research to see if what they are dreaming about already exists. Gathering obvious data on your market, competition, and industry benchmarks in advance not only helps ensure you are on to a viable idea in the first place, but will help you speed through creating your plan.
Pick A Business Plan Template
Your next step is to select a business plan template. Consider the format which will work best for you and your needs, where you will store it, and the file types you are likely to collaborate and share in. Some options will certainly be more versatile than others. Such as Microsoft Word or Google Docs. Business plan formats have changed significantly over the years. Just like the most effective choices for pitch decks and resumes have too. Most notably this has led to shorter formats. Some have even bragged of building billion dollar startups based on a one page business plan. That may not be enough space for you to really map out your business. Especially as a first time entrepreneur and business owner. Though creating a whole book is probably going to result in a document neither you or anyone else uses or refers to again after you complete it. Find the right balance for your needs and experience level. You can also expand on it, or condense it later as well. For example; if no one is reading through it, or you are gaining proof and need to take it to the next level.
Your Executive Summary
The most important component of your business plan is your executive summary. This condenses your entire plan down to just one to three pages. It is a far more usable and effective document. It is what you will personally use and share the most. You’ll want to include it in your data room, along with your pitch deck, when fundraising. This is what lenders will ask for before wanting to see the rest of your plan. Most opinions and decisions about your business will be made based on this summary alone. Done well, it can help you sail through any further due diligence or underwriting. If it is a flop, you won’t get any further than this step. You can either begin with your summary, and then expand on it to flesh out your full business plan, or go long, and extract your summary from the full plan. This is yet another of the critical components of a business plan you must understand.