Here at Jason Wiener PC, we get asked all the time about the process for starting a new business or converting to a different form of business. One of the first questions we ask any client is “Do you have a business plan?” I would estimate that six or seven times out of 10, the answer is “no”. So, this article will discuss why a plan is indispensable and what should be included in a business plan.
The main reason for putting together a written business plan is very practical. It takes your thoughts and ideas about a business and grounds them and it makes your business more likely to succeed. You may know exactly where you want to go, what the timelines and goals are for the company, but no one else does, even if you have multiple conversations with a support group or steering committee. The plan gets the ideas out of your head and onto paper. It communicates those ideas to other people in a way that allows them to see your vision.
Besides putting all of your ideas in writing and conveying your passion to outsiders, a business plan is extremely useful when looking for funding from outside investors, banks or other lenders, and when searching for potential new members or partners. It presents these people and institutions with specific information about your proposed business and allows them to judge whether you know what you are doing, and it shows that you have a plan to get where you want to go. If you do not have a plan, it is difficult to convince outsiders that you are sufficiently knowledgeable about business in general, much less your specific industry.
This is an outline of a business plan that we often share with our clients and here are some additional resources you can check out. Our business plan is tailored to the cooperative business model, but can be used for any business (S-corporations, limited liability companies, corporations, etc.). The questions all revolve around who you are, what your business is, how you are going to finance it, and what the market for your product or service is. The main categories are:
- Overview/Executive Summary
- Product/Services Description
- Customers or Members
- Marketing Plan
- Personnel, both Management and Employees
- Financing/Financial Data
- Risk Analysis
In working with many clients, I have found that the section on financial and financial data is the most difficult for new companies to visualize. I try to assist them by asking the questions – “Where is the money (revenue) coming from, specifically?” and “Where is the money (expenses) going to be spent?” And lastly, “How are profits going to be distributed or shared?”
As an example, a person has a great idea for a new service business. By thinking about revenue and expenses at the very beginning of the process, the person can focus on how to make their dream come true. Who will buy their service? How much should we charge for the service? What kind of income can we expect the first year and the next two years? Then the opposite side of the coin, what kind of expenses will we have the first year or two? Do we need employees or equipment? Do we need office space? How much is that going to cost? The answers to all of these questions will help the person with the ideas to seriously consider the services that he or she believes will be the next big idea. The answers to these questions and creating a business plan will ground the ideas in reality, while creating a clear direction and pathway to move forward.
So, if you have an idea for a new company or you wish to take your current company in a new direction, a business plan is the vital first step. Keep it flexible and enjoy planning; it does not have to be a chore. Use your friends and family as sounding boards while you are churning ideas in your head and putting them down on paper.