One of the common things you’ll hear from people when you say you’re going to start a business is that you need to write a business plan. And there is no doubt that planning is a vitally important part of the process when starting out. You need to know where you’re going and how you plan to get there, and that’s exactly what a business plan should spell out. The problem is, many would-be entrepreneurs have never written a business plan, and are overwhelmed at the very thought of it. Sure, you can find “how-to” resources online that will spell out all the sections and what they should contain, but none of the examples are going to match your business and your circumstances exactly, and if you have a unique business model at all, good luck finding a decent resource.
Depending on what you read, you might think you need to come up with 30-50 pages of meticulously thought-out, detailed material, including comprehensive financial projections, market studies, contingency plans, and more. So it’s no surprise that the idea of having to write a formal business plan has kept some budding entrepreneurs from taking the leap into business ownership altogether.
As I mentioned, you do have a lot of options for help if you buy into the conventional wisdom that a formal business plan is an absolute necessity. For starters, there are several hundred books on the subject, ranging from the “For Dummies” version for about fifteen bucks, to Bankable Business Plans for Entrepreneurial Ventures for $95.00. Or you can download some slick software, like Palo Alto Software’s Business Plan Pro for $100-$200. If you want to go all out, you also have the option of hiring a firm like Portland Oregon’s MasterPlans to create a plan for you, for an average of $1,500-$4,000.
Let’s be clear: if you’re in need of start-up financing, you will need a more formal business plan, and it might even be worth shelling out hundreds or even thousands of dollars and spending plenty of time to create one. Even then though, some bankers will tell you less is more, at least initially. When it’s time for your proposed loan to go to committee – or whoever the decision makers are – they want to see everything. But when you first present the idea to your financier, they’ll just want enough to help them decide whether it’s worth taking it to the next step.
If you don’t need major financing to get your business going, even if you might need it down the road, and if you’re dreading the idea of creating a formal business plan, take heart. A study undertaken a few years ago by Babson College has some good news for you. The study, entitled Pre-startup Formal Business Plans and Post-startup Performance, looked at 116 businesses started over an eighteen year period, from 1985 to 2003, and here’s what they found:
The analysis revealed that there was no difference between the performance of new businesses launched with or without written business plans. The findings suggest that unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business.
Does that mean planning is unimportant? Again, no it does not. It means you can actually start planning to run your business… planning to do business, rather than planning to plan to do business. It has been said that a goal with out a plan is just a wish. I definitely advocate putting together a well-thought-out, written plan. But for most businesses, that can be as little as a single page.
Welcome to the one-page business plan! Your plan should have the following elements, all of which should be able to fit on one or two pages:
Vision – Your vision talks about what you’re building. Whether it’s to dominate your market or simply be the best at what you do, this one to three sentence statement tells your company’s future.
Mission – While your vision tells the end result of your efforts, your mission statement talks about why your company exists. It talks, in a general sense, about how you will accomplish your vision.
Objectives – This section can simply be a list of bullet points stating your business goals. These items might be, “Generate $100,000 in revenue this year,” or “Hire a full-time assistant by the end of the third quarter.” Don’t worry about detailed specifics in this section; just list end results.
Strategies – Your strategies tell how you’ll meet your objectives. Without going into great detail, list bullet points, such as, “Build a strategic alliance with the Chamber of Commerce to increase local visibility,” or “Maximize gross profit by utilizing co-op advertising with select vendors.”
Action Plans – You’ll still use bullet points here and won’t be overly descriptive, but these listed items will have dates tied to them and offer more specifics than your strategies. Examples are, “Move to Greenway Business Park office – November 1,” and “Negotiate bulk rate pricing with XYZ Supply beginning March 15th.”
This one-page plan, like any good business plan, is a fluid document and will change as your business changes. If you do go for financing at some point, this plan will provide a starting outline for a more formal plan. And even then you don’t have to fret too much. (Check out GrowThink’s innovative Ultimate Business Plan Template software for an easy-to-use, effective way to create a professional business plan to take to any financial backer.)
Unlike the kind of plan you put together for financial institutions, the one page business plan is light, practical, and easy to refer to. You might even consider keeping it posted on the wall above your desk to remind you where you’re headed and how you’re going to get there. If you’ve used a one-page business plan – or a traditional plan – share your experience with the community in the comments!
Excellent article. These days, there is far too much focus on “having a business plan”. The plan should be a tool that helps point you in the right direction, not a formality that validates the officialness of your “business”.
You need to plan, of course. But having a plan just for the sake of having a business plan (unless you are looking for outside financing) is far from a requirement if you want to succeed. Your plan is going to be based on assumptions (which are virtually guaranteed to change); instead of spending countless hours writing the plan, take some time to get more feedback from your potential customers. That feedback will tell you more than your business plan “guesses” will anyways. Excellent article Matthew.
Jason
http://twitter.com/StartupSidekick (Follow me on Twitter for fresh entrepreneurial advice)
An excellent article that will hopefully liberate some people form the self-flagellation of extensive business plans. However, a one page business plan can be a valuable resource. Answering 5 simple questions is important for focusing your efforts and communicating effectively to your stakeholders (owners, employees, customers, funders):
What are you building?
What is your reason for being?
What specific, measurable outcomes will you achieve in the next year?
What do you need to do to grow and sustain your organization?
What are the specific action steps you have to do?
The One Page Business Plan books by Jim Horan are a great resource. I use his books and software with my clients as an integral part of the planning and performance coaching.
Great Article for budding entrepreneurs. Mathew, you are right. This article helps the young ones who has no business knowledge and helps them to put everything in a proper manner. This one page snapshot will give every aspect of business is a more disciplined and focused way.
Another thing you add to a link to mindmap to give a visual appeal to this business plan do.
All the best.
Robert
Nice article.
True that the importance of the business plan has been a bit too far. At the end, it is just a tool to present your business project to third organisation in order to get fundings for example. Still important though.
But for me the most important part of planning your business is for you no to fail. Don’t plan too much as it is not good to stick too much to something as it never exactly happens the way you plan it anyway.
It is essential to do all the part of the business plan though like market research for example. It is not for people, it is for you. That is why many people say that business plan are good I think, just to make sure that the entrepreneur will not forget important part of the business start-ups project.
Research is a huge part of it. You have an idea and you need to check if there is a demand for it apart from your family circle (who are obviously all ready to buy it). I think that quantitative research is important and it helped me a lot. DIY for free or almost if you have the data or do it online thanks to market research company.
Business plan is definitely a most. Allows you to take your idea and see how feasible it would be to actually get it done. I revised my business plan for one of my projects probably 7 times until I got to something I was comfortable with. Your business is a living document that will always change.
Great article. A solid business plan is must for the success of any business. Thanks for posting it and sharing with others.
Excellent article. In fact I am one of them, who was searching for some idea like this. Though I am just planning to start but was struggling to write down a business plan. Thank you for your nice and easy to understand article.
As an entrepreneur, i can confidently say that a one page business plan may not do the magic in all situations. Though not trying to dispute the writer, i think a one page business plan should be a comprehensive summary of the main business plan you have written.
A one page business plan will definitely not be recommended for use if you are trying to raise startup capital from investors. Investors need to see every damn details of your business and a one page plan can’t reveal such.
But if the plan is for your personal use, to help your focus in check; then go for the one page plan.
@Strategic: For the most part I agree, and the article states that the one-page plan is not for someone seeking investors. On the other hand, a close friend of mine went to his bank about a year ago with a comprehensive business plan (about 80 pages) just last year, and his banker said, “Are you kidding me? You expect me to read this?” She said she needed 5 pages maximum to assess the deal, and only then would she need all the details IF the deal looked like it was worth pursuing. Which is also what’s implied in the article, but an interesting anecdote at least.
This is one of the most succinct explanations of a business plan that I’ve seen in a while. Useful for young and “seasoned” entrepreneurs alike. Thanks for sharing!