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Many small business owners are often in a quandary as to whether or not they should spend the time and effort and sometimes money to have a formal business plan developed. Writing a business plan can be a daunting task for many and is often one of the last things small business owners want to spend time on. Often they only resort to writing a plan when they need outside funding. This article is intended to present a small business owner’s perspective on business plans. I’ll touch on what I think are the pros and cons as well as some approaches for “painlessly” developing a small-business’s plan.
A business plan can serve a number of different purposes and the first step is to decide what purpose your business plan will serve. Will the plan be developed with the purpose of securing outside funding, as an operating plan to guide the management team, or to help make an important go/no decision on the business, product or expansion? Once you know the purpose, you will be able to determine what sections the plan should emphasize and the level of complexity and expertise needed.
There are many resources available for do-it-yourself business plans including step by step books, software programs and templates. If you are looking at the business plan as an operational guide, you may be able to complete it yourself by taking advantage of the many resources available. However, if you are looking for significant outside funding, or need to make an important go/no decision, you may want to consider outsourcing part or the entire business plan to a professional.
The following table presents my suggestions for developing a business plan based on the purpose of the plan. I’ve included a list of the topics that are typically included as well as areas to emphasize and expertise needed for the different plan purposes.
| Section | Key Components | Importance Based on Purpose | Outside Expertise |
|---|---|---|---|
| Executive Summary | 1-2 page overview of product/service, management, market opportunity, competitive advantage, financial projections, funding needed |
A – Funding C – Op Guide C – Go/no go |
Professional business writer |
| Company Description | Brief statement of facts: name, legal description, location, ownership. |
A – Funding C – Op Guide C – Go/no go |
None needed |
| Management Capabilities | Relevant business experience, personal qualities |
A – Funding C – Op Guide C – Go/no go |
Professional business writer |
| Industry Analysis | What industry do you compete in? How are players in the industry organized? What are the trends? |
A – Funding C – Op Guide B – Go/no go |
Market researcher |
| Market Opportunity | What is the size of the market available? Who are target customers? How will target customers be reached? What market share can be attained? What are key market drivers? |
A – Funding C – Op Guide A – Go/no go |
Market researcher |
| Competition | Who are key competitors? What are their strategies, strengths and weaknesses? |
A – Funding C – Op Guide B – Go/no go |
Market researcher |
| Marketing Strategies and Tactics | How will you differentiate from competitors? How will you reach target customers? What will it cost to generate leads, convert to customers and retain customers? |
A – Funding A – Op Guide B – Go/no go |
Marketing/brand strategist |
| Operations Plan | What will be required to establish efficient day to day operations? |
A – Funding A – Op Guide C – Go/no go |
Industry specific operations experience |
| Risk Assesment | What are the internal and external risks that will impact the business? What mitigations will be in place to minimize risks? |
A – Funding B – Op Guide A – Go/no go |
Industry specific business/financial experience |
| Financial Projections | Pro forma financial statements, typically 3-5 year horizon. Income statement, cash flow, balance sheet. |
A – Funding B – Op Guide A – Go/no go |
Accountant/CPA, financial analyst |
| Graphic Design | Professional and visually interesting to read |
A – Funding B – Op Guide A – Go/no go |
Graphic Artist |
If you’d like more information on developing a business plan for your small business, contact us at 619-819-0252 or online.
About the Author
David Heistein, CPA
Dave is co-founder and managing partner at Profitwise Accounting. Dave is a Certified Public Accountant in the state of California, as well as an advanced QuickBooks Pro Advisor and Instructor. As a small business owner, he is dedicated to educating and informing other business owners on bookkeeping and accounting matters.
