The business plan: A résumé for your great idea

You have the next great product or service—one you’re sure customers will clamor for. It could be a hobby you’ve been working on that you want to turn into a full-time venture. It could be a new division for an existing business.

Like many other entrepreneurial hopefuls, you probably wish there were a crystal ball to tell you the future of your product or service idea. But before you get too close to and emotionally invested in your idea, you need to at least make an educated guess as to whether it has a chance of succeeding and, more importantly, if you should get it up and running at all. That means you need to commit it to paper by writing a business plan—an objective, in-depth analysis of the viability and potential success of your idea.

What is a business plan, really?

An easy way to understand what a business plan is would be to compare it to a document we all can relate to. When you’re looking for a job, you assemble a résumé to “sell” your abilities and qualifications to a potential employer to show you can fill a need for the company.

Similarly, a business plan functions like a résumé for your new product or service idea. Your plan has to demonstrate that your idea fills a need for potential customers. And like a résumé, a business plan is broken out into sections that highlight how your product or service meets those needs. According to SCORE (Service Corps of Retired Executives) and the SBA (Small Business Administration), there are certain components to always include in your business plan, even if you’re not on the hunt for investor funding or a bank loan:

• Executive Summary – This is a brief synopsis of the details in the plan that explains why the business is needed.
• Market Analysis – This section includes industry information, target market description and competitive analysis, plus your strengths, weakness, opportunities and threats.
• Organization and Management – This explains the proposed organizational structure, ownership and experience of the management team and their proposed roles within the business.
• Marketing and Sales Strategies – This details your marketing and selling strategies and activities, as well as your distribution methods.
• Service or Product Line – This section outlines the features and benefits to the customer, plus specifics on product development and lifecycle.
• Appendix – This final section is reserved for all the documents and research that support the preceding sections, such as market studies, product photos and legal documents.

Entrepreneurs who need financing for their new product or service must also include additional information. Visit the SBA website for details on extra sections to include within the business plan that address the areas critical to secure such funding.

What does a business plan do?

Business plans help you to determine whether or not an idea is viable to begin with.

It forces you to look at all the necessary things it will take to get your business started, as well as the factors to consider that could affect its success after you’ve hung out your shingle.

Assembling these components ensures you know all you need to about your proposed service or product idea before committing human and financial resources to its development. If it looks viable, it also ensures you can further “sell” your idea to potential investors, bank lenders and most importantly, prospective customers.

But what if the information you put to paper ultimately shows that your plan won’t work? While you may not like acknowledging what the details are telling you, be glad it’s saving you from investing time, effort and a lot of frustration into something that could have cost you a lot more than just sweat equity.

Once viability is confirmed, business plans help you prepare to create, launch and sustain your product or service.

Your plan is a guide for your business growth. Use it to track timelines and milestones for the phases of your product or service development, and to create measurable goals by which to assess your new business’s progress.

Because a business plan forces you to address how you’ll market and sell your product or service, you’ll have already put together the basics of how you’ll launch it, to whom, how and when. You have essentially put together an action plan for what was once just an idea.

What a business plan doesn’t do

A business plan can’t predict whether or not your proposed business will succeed.

You’ve put a lot of sweat equity into your plan. You worked on it for weeks, perhaps even months, fine-tuning every detail so that nothing is left to chance. Your new business is sure to succeed, right? Not necessarily.

It’s impossible to plan for every scenario, every challenge, every aggravating obstacle, every wild success. Too many other factors are at play that influence whether or not your business will get off the ground. There are regional and national economic conditions, health of financial markets, competitor reaction, world events, weather disasters and so on. And if you’re seeking funding from investors or a bank loan, a technicality or unexpected glitch could derail your plans.

Does this mean that putting together a business plan is an effort in futility? Not at all. A business plan outlines the items you can control, and it should account for those things you can’t. Simply acknowledging the things over which you have no control shows that you are at least aware of them, and if accounted for in your plan, you can plan for contingencies to counter those obstacles.

A business plan isn’t meant to be a static document.

Once it’s written and you’re happy with the final document, don’t tuck it away in a file cabinet. It’s actually a living document, a work in progress that evolves as the business evolves. It’s a good idea to review it regularly—perhaps every quarter or six months—to ensure plans are on track, to incorporate new information as it becomes available or to readjust anything that may have changed which could affect your progress.

You can also think of it like a map to a particular destination. When you’re driving somewhere, you may encounter construction or a traffic accident, so you change your course. It might take a little longer to get to your destination, but you get there just the same. A business plan functions in the same way; when your business encounters obstacles to its growth, you revisit the relevant sections of the plan to determine if you’ve accounted for these obstacles, and how best to proceed in order to get back on track to reach the goals you set forth in the plan.

Business plans—not an exercise in futility

Ultimately, the exercise of putting together a business plan helps determine if you have a viable idea—and lays the groundwork for its creation and launch. Just going through the process can inspire you to look at your product or service in different ways you hadn’t thought of: you may redefine your target audience, amp up your distribution strategy, rethink your product release timeline, look at more cost-effective methods of product development and so on.

Creating a business plan forces you to not only take a more realistic view of your idea, but to assess whether the idea is worth all the time and effort it would require to see it come alive. And if it turns out it could well be worth it all, having a business plan could put you on the path to potential success that much faster.

References

Klein, K.E. (2008, March 12). Do you really need a business plan? Bloomberg Businessweek.

Henricks, M. (2008, November 17). Do you really need a business plan? Entrepreneur.

Do I really need a business plan? (2010, March 10). SCOREMinnesota.org.

Ward, S. (2010). Why you need to write a business plan. About.com.

Essential elements of a good business plan for growing companies. SBA.gov.