You decided to start a business.
To go from hobby to become a “real” business…
but wait, you need a business plan. Right?
Maybe. Maybe not.
Everyone and his brother (or sister) says that every business needs a business plan. I have to go on record and say that I do NOT agree.
A business plan definitely has it’s place and it’s purpose but I don’t agree with the “must” factor that a lot of advisor’s place on them. For some, going through the exercise of doing a business plan is an absolute waste of time. Time that you could use doing other things like actually starting and building your business.
Don’t get me wrong, there are parts of a business plan that can be useful for a newbie but for the most part, it’s an exercise in futility unless you are going to the bank for funding/startup capital. And admit it, most business that startup today are of the bootstrapping variety… not needing any bank loans to get started (see $100 Startup).
There are pieces of the business plan puzzle that are useful for the everyday startup – for the bootstrapper. Here are a few.
What You “Need”
Pick A Niche (Define Your Market) – you have to know who you want to work with.. If you know who they are, you will know where they “hang out” and where to find them online and offline. Without this, marketing is just about impossible. Okay, maybe not impossible but it will be very difficult and you will waste a lot of time and money trying to be everything to everyone.
SWOT Analysis – usually a part of the Competition Analysis… this is really the only part that I think is beneficial for a newbie. It’s the Strengths, Weakness, Opportunities and Threats Analysis (SWOT for short). It’s helpful for you to know where you’re strong and where you could use a little help so that you can either learn that area yourself or you can make a point of hiring that task out to someone.
Budget/Financial Components – once you know what your products and services are, you absolutely, positively need to get your budget in order. Your budget will dictate to you as a business owner what you can do and when you can do it. At first it will be a little bit hard to reign in what your projected income and expenses are but as your business begins to stabilize, this will become easier and easier for you to do.
And don’t be too hard on yourself. You don’t need to do 5 year projections. Start with 1 year and break that down into quarters and then into months. And know that as a startup, things will change more often than not… so what you thought would be happening, may change once you’ve been in the trenches and testing things with your market. It’s okay to make the appropriate changes. Think of your budget as being a fluid document instead of something that is etched in stone and unchangeable. (See my post on goal setting and budgeting for more info).
What You Don’t “Need”
The rest of it…for now, can be thrown out. Here’s why?
Competition Analysis – for the bootstrapper, this is only really beneficial to the extent of knowing that there is competition and therefore there is a market for what you have to offer (or what you would like to offer).
Executive Summary – for a small one or two person office, you ARE the executive team. You’re essentially explaining yourself to yourself.
Business Purpose – of course you know what your business purpose is, right? Although it’s helpful to write it down as a reminder to yourself and those that are in your realm, it’s not necessary to write a thesis on the subject.
Design and Development Plan – this is more important to manufacturer/product based companies, for services providers, this isn’t as relevant… so a waste of paper and time. Now if you are going to create a information product of some sort, I retract my statement.. you will need to create content and create a schedule for doing so aka a development plan.
Organization Structure – again for small one or two person shops, this isn’t necessary, since the organization isn’t all that complicated. However, once you begin to grow your team beyond yourself, it will be helpful to have a “org chart” of some sort and a defined separation of duties so everyone knows who is doing what and what their respective responsibilities are.
What are your thoughts on having a business plan? Is it an absolute must in your business or have you compromised/picked out the things that you need? Let me hear it in the comments below.
Until next time,
Elements of a Business Plan – http://www.entrepreneur.com/article/38308-7