Five Steps to an Effective Business Plan

Five Steps to An Effective Business Plan

You have an idea for a business. You know what you want to

sell, who you can sell it to, and how much you stand to earn

from it. There's just one more thing you need: a business

plan.

Many people dread the idea of preparing a business plan.

They think of them as complicated, unnecessary documents

that exist only to make it more difficult for them to get

started as an entrepreneur. They are wrong.

Business plans are necessary because they help you "see"

your business. Instead of just talking in abstract ways

about your "customer base" and your "profit potential," it

lets you put those things in writing and in concrete terms.

It forces you to think through every aspect of your business

in advance so down the road you don't realize you've made a

mistake that's cost you your business, your life's savings,

and your job.

Besides all of that, they are also important tools for

getting other people interested in your business. For one,

if you've taken the time to create a business plan, others

will realize that you are serious about this endeavor and

that it isn't just some pie-in-the-sky dream. A business

plan also shows people that you are a professional and that

you understand what it takes to start and manage a business.

This is all extremely important, particularly if you need

any type of outside funding, such as loans or investors.

So while the bad news may be that you definitely do need a

business plan, the good news is that they don't have to be

complicated. The truth is that your plan only needs to cover

seven main areas and none of these areas are going to

require you to write a full-length novel. These five

sections are the executive summary, the company overview,

the business environment, the company description, and the

action plan. All of those sections may sound complex, but

most of them won't involve information that you don't

already know.

Executive Summary

Even though this section will technically be first in your

business plan, you should actually write it last because,

just as its name implies, it summarizes the entire contents

of your business plan. Because many readers never bother to

get beyond the executive summary, you must make sure that it

is comprehensive and well-written.

If that sounds difficult, it isn't. Just make sure to read

through your entire business plan before you start writing

the executive summary. Make a list of information that you

think is the most important or that would really stand out

to a reader, and be sure to include all of it in your

summary.

Company Overview

This section explains the guiding force behind your

business. It gives them a chance to see what you have in

mind for the business and how you plan to get there.

Generally, the overview does this by providing a mission

statement, goals, and objectives for your business.

In a nutshell, a mission statement provides the answers to

all of these questions in less than 50 words: What am I

selling? Who am I selling it to? Why am I selling it? It

doesn't need to be just one sentence, but keep it as brief

as possible.

Goals and objectives, the other components of the company

overview, are often confused by first time business plan

writers. Remember that goals are things your company wants

to achieve while your objectives are how they plan to get

there.

Business Environment

This section will probably require you to do some outside

research because it involves information relating to your

industry, your market, and your competition. You need to

take an honest look at the field you are preparing to enter

and pay close attention to its structure, its trends, and

its barriers to new businesses. Become familiar with the

major competitors in your industry and decide how you will

differentiate yourself from them. Also, get to know your

potential customers and what makes them tick. The more you

know about them, the more likely you will be to turn them

into buyers.

Company Description

At this point in your business plan, you need to go into

detail about your business. You can't simply define your

company in terms of what you sell, but also in terms of who

you serve, what resources you will use, what types of

employees you are looking for, what type of distribution

method you'll utilize, and more. All of this factors combine

to create your company.

In addition to this, you should also state your company's

UPS (Unique Positioning Statement). This is a one sentence

statement that explains what sets you apart from all of the

competitors.

Action Plan

The last part of your business plan is this section which

outlines the steps you need to take now in order to make

your plan work. These should also reflect the goals and

objectives that you've outlined in your company overview.

Besides these primary pieces of a business plan, you may

also need to include a financial section, particularly if

you plan on using it to get outside funding for your

business. This may take more thought and planning than the

other sections because it will require you to make some

assumptions about your business's revenue potential. The

most important thing is to base any estimates on realistic

expectations, not optimistic dreams.

You may want to visit the following websites for some

samples to give you an idea of how things should be

formatted and worded:

http://www.businessplans.org/businessplans.html

http://www.bplans.com/sp/

With some useful models and this helpful information, you'll

be well on your way to completing your effective and

professional business plan.

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Vishal P. Rao is the editor of Home Based Business

Opportunities - A website dedicated to opportunities, ideas

and resources for starting a home based business. Visit him

at: http://www.home-based-business-opportunities.com

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