Small Business Plans
How to create an effective small business plan to help you develop and launch your business, with Henry Lopez. Henry is a serial entrepreneur, small business coach, and host of The How of Business podcast.
On this episode of The How of Business podcast Henry focuses on Small Business Plans. Do you need one? What should you include in them? Who is it for? How do you go about completing one?
What is a Business Plan and why do you need one?
A business plan is a document that organizes and explains your plans for a new business. A good business plan not only helps you focus on the specific steps necessary to make business ideas succeed, but it also helps you achieve short-term and long-term objectives. It also help to create some order from the chaos that is part of starting a new small business. It helps you communicate your business idea to others, and validate your business model.
Who is the Business Plan for?
It’s important to first understand who is the audience for your business plan, and that audience will like change as you progress with the development of your new business. Determining who the plan is for will help with deciding that it needs to contain and how formal it needs to be. Initially, your business plan is for you and perhaps your business partners. Then you may need to create a version for investors, lenders and potential landlords.
Do you need a formal Business Plan to be successful in business?
No, but it certainly helps! If done right, it helps you validate that your idea actually has the potential to become a successful and profitable small business.
There many different types of Business Plans, and the format or type that’s right for you depends in part on what phase you are in and who is the audience. Some argue that formal business plans are outdated and nobody reads them. That’s not necessarily true. It depends on your audience and objective. There are plenty of examples of highly successful business that started with no formal business plan (i.e. Southwest Airlines) and others that started with a more elaborate university project (i.e. Dell, FedEx).
The most common reason small businesses fail is that they run out of money! To avoid this you need to plan for enough up-front and on-going working capital and track cash flow. These are essential components of an effective small business plan.
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Lean Business Model Canvas:
The nine “building blocks” of the business model design template that came to be called the Business Model Canvas were initially proposed in 2005 by Alexander Osterwalder. Since the release of Osterwalder’s work around 2008, new canvases for specific niches have appeared.
The Lean Business Model Canvas is also great for internal planning.
Advantages of the Lean Canvas approach include:
- Supports quick launch and iteration.
- Avoids writing a lengthy document that no one reads.
- Avoids the analysis paralysis that often comes with long business plan development.
- Works well for lean start-ups and also works well as a starting point to iterate through ideas
Download an example: Lean Business Model Canvas
Use the Lean Business Model Canvas either early in the process of developing your business, as it’s a great way to quickly validate the business model. It’s also a great way to develop and execute on an MVP (Minimum Viable Product) approach to developing a small business.
Pitch Deck or Business Summary
A small business Pitch Deck or Business Summary is often appropriate for sharing a summary and the highlights of the business in the early stages of business development. It’s and ideal type of business plan for potential investors, partners, and landlords.
The contents of a Pitch Deck or Business Summary usually include:
- Project Summary
- Your Team
- Business Model Highlights
- Preliminary Financial Projections
- Capital Plan
Complete Formal Business Plan
A complete small business plans includes all of the details of the proposed business. An effective business helps you create an effective strategy for growth and profitability, helps you determine initial and future financial needs, and can be used to attract investors (including angel investors and VC or Venture Capital funding) and lenders.
Free Download: Business Plan Outline
Common Business Plan Mistakes
The biggest mistake with business planning is to not create one at all. Other common mistakes include getting stuck because of the writing, worrying about what others will think about your plan, telling yourself what you want to hear and not getting help to challenge your assumptions.
Aside from creating your business plan, what most important is that you engage others (a mentor or coach) to challenge the assumptions you have made in your plan.
Episode Host: Henry Lopez is a serial entrepreneur, small business coach, and the host of this episode of The How of Business podcast show – dedicated to helping you start, run and grow your small business.
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