A Written Business Plan Keys Entrepreneurial Success

No matter what type of business you run...No matter what stage of development your business has achieved...A written business plan is essential for continuous business success.

It will help you visualize and articulate goals. It will help you communicate with lenders, customers and employees. It will help you track your success and enable you to make business decisions based on accurate information.

One of the greatest challenges for any small business owner is to carve out the time, on a regular basis, to understand the overall business environment and to determine its impact on business performance. Because the small business owner is pulled in so many directions, a business plan can serve as the framework from which to gauge the business' performance relative to internal goals and the outside environment.

A good business plan is a living document. It's used on a routine basis and updated regularly. It sets the direction of the company and serves to measure performance relative to specific goals.

A well-written business plan documents all areas of the business, including these four main categories:

1. description of the business
2. marketing plan
3. management plan
4. financial management plan

Description of the Business

Your description of the business will generally answer the question: "What business am I in?" This category includes three primary sections: 1) nature of the business, 2) product/service, 3) location. The first section provides detailed information of the business: its legal form, business type, what specific product or service is offered, why the business will succeed, operating hours, etc. Place emphasis on any unique aspects of the business and how they will appeal to the customer.

The product/service section describes the details of the products and/or services offered. This section should be written from the customer's perspective. Among other points, it should answer such questions as: What are you selling? How will I benefit? Which products are in heavy demand? What is different about your product or service?

The location section describes the particulars about the specific setting of the business. Since location is such a strong factor in the success of any business, this section should cover more than just the address. It should include such topics as: What kind of space will be needed? What are the desirable characteristics of the location? How accessible is it? What demographic factors have been considered?

Marketing Plan

The marketing plan is important because it describes, in detail, how you will market your business to potential customers. While some business owners feel that the service or product will "sell itself," most successful firms require a proactive approach to attract sales. A good marketing plan will provide all the information and guidance for reaching customers, and should go beyond decisions on advertising.

Most marketing plans address four topics. The first section identifies and describes the customer, the market, the market share held by the business, and the general industry and economic climate. This section focuses on the general aspects of the customers, how the business will serve them and where the business fits in its market. Also, it sets the stage for the other three sections.

The second section focuses on the competition. All known information concerning direct and indirect competition is gathered and summarized. Consideration also should be given to businesses that can provide substitute products or are located in other geographic areas, especially if the Internet can be used to reach customers.

Pricing and sales of the product/service is addressed in the third section. With a well-defined pricing strategy based on a good understanding of the target customers, a business can effectively improve its competitive stance and profitability. Setting the proper price strategy requires you to understand the full cost of providing the product or service…and also current market conditions.

The last section of the marketing plan addresses advertising and public relations. How a business is advertised and promoted can determine its success. An overall strategy providing a consistent message to the customer across multiple promotional avenues will help establish the business in the community. This in turn will help drive sales.

Management Plan

The management plan sets the foundation for the success of the business. This category addresses particulars regarding the owners, managers, and key employees of the business. It describes necessary skills and assigns responsibilities. It evaluates the relative strengths and weaknesses in existing management and describes the steps needed to capitalize on the strengths and overcome the weaknesses. The plan also provides parameters for additional training and offers guidance for decisions related to the application of outside assistance or services.

Financial Management Plan

Sound financial management assures that a business will survive through tough times and grow during good times. In this category, the very nature of your business is described in financial terms. While it is not necessary that a business owner become an expert in the realm of finance and accounting, it is imperative that the owner become familiar with and understand the financial impact of all business decisions.

In general the financial management plan should include a complete set of financial statements: balance sheet, income statement, cash flow statement, etc. Historical statements (for existing firms) and proforma (future projections) statements are included in order to provide a clear understanding of where the firm has been and where it is going. It is not unusual for a comparison to industry standards to be included as part of this category's appendix to determine how well the business is performing relative to similar firms.

The effectiveness of a business plan is in the writing. Once the document is produced, the engaged owner has the perfect tool to use in setting the direction of the firm and measuring its performance. Routinely updating the plan helps refocus management and provides the needed framework adjustments for future success.

This story was featured in the April 2009 newsletter