Running a business without a written business plan is like heading out on a cross-country trip without a map or GPS. Although you may be able to make it to your destination, you may spend far more time and money navigating through unexpected complications than you would if you had a guide. Many lenders require a copy of your business plan as one of the key documents it needs when deciding whether to extend a loan or line of credit.
But what should be included in your business plan? And how do you get started? Below we discuss a few of the key steps to take in the business plan drafting process.
The Goals of Your Plan
Ideally, you want your business plan to serve as a guide through each of the stages of starting and running your business. By outlining your goals and processes in writing, you may maintain consistency and may not need to worry about reinventing the wheel whenever you hit a snag. It’s also a good way to conceptualize your goals—when do you want to begin turning a profit? Do you hope to expand or turn your business into a family business for generations to come? What factors do you consider when deciding whether it’s time to sell or move on? Your business plan itself may not need to answer all these questions, but thinking about them at the outset may give you something concrete to work towards.
Elements of a Business Plan
Although your business plan doesn’t need to follow a particular format, it’s worth considering whether to include any or all of the below elements.
This is a 10,000-foot view of your business plan, setting out the broad goals and concepts without getting too far into the details. Consider what you’d tell a lender or investor about your business if you had only 15 seconds—this is what your executive summary should sound like.
This brief section of your business plan should describe what your company does and what markets it serves.
Organization and Management
How is your business structured? How are hiring decisions made? What’s the employee review process? Do you have a board of directors? Your organization and management section should describe, in some detail, how your business is structured.
Market Analysis and Service/Product Lines
A key element of any business is its ability to identify its target markets and market to these consumers. Your business plan should put these concepts into writing, including market research, marketing strategies, and how your product or service benefits your customers.
Without any financial projections, it may be tough to gauge your business’s success or progress toward its goals. From sales numbers to overhead expenses, having target goals of where you hope your business to be in the next six months through 20 years (and updating these projections regularly) may help you track your progress on the path to profitability.
Many business plans refer to documents that aren’t included in the plan itself. Keeping an appendix with copies of your tax documents, permits, leases, and contracts may make it much easier to pull up key documents when you need them.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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