Essential Elements for a Business Plan
When you are starting a business, your odds of success will be much higher if you have an actual plan. However, sometimes recommendations for a business plan – like the ones offered by the Small Business Administration (SBA) – seem to be bloated with unnecessary materials. Small business planning doesn’t have to be complicated at first. You can start simply, then add elements later on as your business grows.
We’ll talk about some of the essential elements you need in your business plan and make references to other aspects that you might need now or later.
Company Description
The first essential element of your business plan is a company description. You need to know what you are hoping to accomplish, with a sense of your general values and goals. Have a sense of your desired size and what steps you might take to achieve it. In addition, have a sense of what your organization principles are likely to be as you start to add employees. If you have more than one person in your organization, it’s worthwhile noting what structure your decision-making will follow.
Products or Services
You need to know how your business will generate revenue. This typically means providing goods and/or services for money. Often, this is where your business plan started: you had an idea of what type of product or service you felt you wanted to provide. It’s not a bad idea to have a sense of the scope of products or services you want to provide, whether you will be a specialized operation or a generalized one.
Market Analysis
Before you start your business, you need to know what the market looks like. This includes industry-specific factors such as demand for your particular products or services as well as the level of competition for providing those products or services. It also includes general business factors such as interest rates, labor costs, supply costs, and other factors that will affect your ability to be profitable.
Marketing and Sales Plan
Once you have a sense of what the market is like for your products or services, you need to figure out how you will break into the market. This means marketing. You will likely want to start with a sense of what is your unique value proposition (UVP), also known as a unique selling proposition (USP). The UVP is a description of why someone should choose your business over competitors. The UVP could be something simple like, “Our store is closer,” or “Our prices are lower.” It could also be something complicated like, “We use LASS to prevent SLAM attacks.”
Once you have a sense of what your UVP is, plan how you are going to market your product or service. With a simple UVP, this might be as easy as putting a “Grand Opening” sign on your neighborhood store, with perhaps some support on local social media like Nextdoor.
For more complex UVPs, you might need to educate your potential customers. Educate them about the pain points you are addressing, explain why current solutions are inadequate, and create a need for your solution even before creating awareness of your business.
Financial Plan
Your financial plan should include information about where your money is coming from and where it’s going. Do you have money set aside? Are you going to need external backers? What start-up expenses can you expect? How quickly can you ramp up revenue from sales? How much will marketing cost?
Be realistic in your financial plan. In fact, be pessimistic. Lower your estimates for revenue and raise your estimates for expenses. See how viable that makes your business before you consider whether this is a step you want to take.
If you need to secure outside investment, all the “unnecessary” materials from the SBA’s business plan template start to become essential. For example, your Executive Summary becomes your elevator pitch for securing meetings with potential backers. Organizational plans also become critical. Investors are more likely to put money in a business that has a formal structure, especially a corporation that provides dividends for their investment.
Risk Analysis
In your financial plan, you looked at the risk that you might not generate enough revenue to cover your expenses, but small business planning should look at more than this. You should look at external risks, such as liability related to your industry.
About 90% of businesses will face a lawsuit over the course of their life, and in many cases these lawsuits will target the business assets. If this is a risk in your industry, you should set up a structure that protects your personal assets from business liability, such as a limited liability company (LLC) or a corporation.
You should also consider internal risks, such as the possibility of losing ownership of your personal intellectual property (IP). This is another reason to set up formal start-up paperwork which defines ownership of different business assets, including IP.
Robust Small Business Planning for Success
If you want to give your small business the best chance of success, then you want to make sure your business plan doesn’t just cover the essentials but is thorough and well-considered. A small business lawyer can help you consider all the aspects that can make a difference between the likely success and failure of your business.
Since 2007, Elizabeth Lewis has been helping small businesses in the Denver area and across Colorado to get established and grow into large, successful institutions. She knows how to build a strong foundation for your business, including taking all the important legal steps such as filing foundation paperwork, protecting IP, and writing strong contracts that can protect your small business from abuse by established players in the market. Elizabeth takes a personal interest in your business and is ready to help you navigate the complex legal landscape that can be challenging for many small businesses.
To learn how Elizabeth can help you launch your business, please contact us today. The Law Office of E.C. Lewis serves clients in Denver and the surrounding area.