A Small Business Plans shows how to set goals and plan actions to grow a new or existing business successfully. Many businesses struggle because they don’t plan well.
Think about planning a family trip to California next summer; you would pack your bags, book a place to stay, and create a fun itinerary. After two weeks in California, you’d feel refreshed and have lots of great photos and stories to share. If you went on that trip without any planning, it would likely be chaotic and stressful, just like a business without a solid plan, which can lead to confusion and missed chances for success.Data from the (World Bank) shows that 90% of businesses worldwide are small and medium-sized enterprises (SMEs). Half of small businesses fail in five years, but a clear plan can boost their chances of success.
Understanding small business plan
A business plan is key to helping your start-up succeed in a tough market. A business plan is like a picnic plan—it should be simple yet detailed enough to guide you. You need a simple plan for your startup that shows your goals, how to reach them, and who your competitors are. You need a clear strategy to help you build your business.
Why you need a business plan
You need a business plan for many reasons, depending on your business type and goals.(Read our article)
1 You need a business plan to get investors, a bank loan, or a business partner.
2 To judge your business idea, you need to understand your customers, check if it’s practical, and study your competitors.
3 A good small business plan tells you your current situation, your goals, and how to reach them.
4 A business plan helps your employees understand your goals, business, and values as your company grows.
5 The financial part of your business plan helps you track money and stick to your budget.
Use a Small business plan to manage and grow your business
The main goal of your business plan is to help you run and grow your business successfully. It’s like a GPS for your car, guiding you to make the right decisions along the way.
Long-term goals are where you want to go, and your strategy, tactics, and budgets are how you plan to get there. Keeping track of real-time information helps you decide if you need to change your plans or stay on track.
Knowing the main purpose of your business plan helps you figure out what to put in it and what to skip. This means you can create a simple one-page plan instead of a long document. Below are some important ways to use your business plan for better management and growth.
How to use a Small business plan to pursue funding
A solid business plan is essential for getting funding because it clearly explains your business model and growth potential. It also shows investors, lenders, or grant organizations how you plan to succeed.
1. Support for loan applications
Your business plan is essential for getting a loan because banks and SBA loans require it; it should show your sales, costs, and cash flow, and explain why you need the money, how you’ll use it, and how you’ll repay it.
Today, a short and simple business plan is often enough for a loan; it should include important financial details and summaries of your strategy, tactics, key milestones, and metrics.
2. Manage funding once received
A business plan helps you get and manage funding well, giving you the freedom to change your strategy while keeping investors updated.
Monitor important results and your progress, check them often, and keep your bankers or investors updated so you’re ready with your financial information when they request it.
5 Elements of Small Business Plans
A good business plan has important sections that explain different parts of a company’s goals. These sections help show how the business will work and succeed.
1. Executive summary
The executive summary is the first and most important part of a business plan, giving a quick overview of the entire plan. It highlights the main points of the business idea. It’s best to write it at the end so you can summarize everything.
The executive summary explains your mission and the products or services you offer. For a new business, it can also include why you’re starting the company.
Write an Executive Summary of a Business Plan
- The summary should clearly show the main ideas of the business plan because bank managers and investors want quick and straightforward information.
- Use strong and confident language in your executive summary to show certainty and build trust, like saying “Dogstar Industries will succeed” instead of “might succeed.”
- Read your executive summary out loud to check if it’s clear and flows well. Then, ask someone who doesn’t know your business to review it and share their feedback.
- The executive summary should be short and interesting, giving key points to grab the reader’s attention. Its goal is to make them want to read the full business plan.
2. Business Description
The Business Description explains what your company does, the problem it solves, and what makes it better than competitors.
Key elements to include in the Business Description
1. The Business Background tells your company’s story, key successes, and any big changes along the way.
2. Mission and Vision Statements show what your company does and its future goals.
3. The Industry Overview explains your industry’s current situation, trends, and growth to show why your business idea fits well now.
4. The Business Model shows how your company makes money and what strategies it uses to do so.
5. Location and Facilities explain where your business is and why it’s a good spot, along with details about the building or space.
6. Legal Structure tells what kind of business you have and how it impacts your taxes and responsibilities.
3. Competitive analysis
To start your competitive research, look for businesses that are already in the market you want to enter. It might feel like a lot to do, but it will help you understand what makes your business special. Once you find your main competitors, see where they advertise, how well they treat their customers, and what their prices are. If your idea is new, be prepared to explain the problems your business will solve, and if there aren’t any direct competitors, check out similar companies that offer related products or services.
For example:
In the high-end landscaping market, the two main competitors are Yukie’s Yards and Dante’s Landscape Design. Yukie’s Yards charges about $12,000 per project with a monthly maintenance fee of $200 and has a Google rating of 3.1 stars from 163 reviews. In contrast, Dante’s Landscape Design has a higher project cost of $35,000 and a maintenance fee of $500, along with a better rating of 3.7 stars from 57 reviews. Both companies do not have environmental certifications and use different marketing methods, with Yukie’s focusing on Google Ads and Dante’s attending home shows.(study QuickBooks)
4. Business Financial Projections
Creating a financial plan is crucial for both new and established businesses. If you’re just starting, focus on developing a budget that outlines your expected income and expenses, even without historical data. For established businesses seeking investors, it’s important to include key financial statements like income statements and cash flow statements, along with three years of accurate financial data to showcase your business’s performance and stability.
Example business financials
Use free Excel templates to manage your business finances: a budget template for new businesses and an income statement for established ones, then summarize your goals to track growth and improve profits.In FY2022, the business generated $200,000 in revenue from 10 projects at about $20,000 each, with a 15% profit margin resulting in a net income of $30,000. For FY2023, projections show revenue increasing to $360,000 from 18 projects at the same price per project, leading to a net income of $54,000. By FY2024, revenue is expected to reach $552,000 from 24 projects at approximately $23,000 each, with a net income of $66,240 despite a slight decrease in profit margin to 12%. (study QuickBooks)
5. Marketing and sales plan
The marketing and sales plan explains how to promote your product or service, including where you’ll advertise, what you’ll say, and how to sell it to attract customers. This shows how your business is unique in the market and how you’ll tell customers about the advantages of your product or service by learning from your competitors.
For example:
You can market your company as the most expensive choice that offers the best quality, or you can emphasize that you’re a local business, encouraging customers to support their community by buying from you.
This plan explains how you’ll tell potential customers about your business using different methods, like social media ads or podcasts, so they understand why they should buy your products or services.
Tips for writing a Small business plan
Investors prefer clear and well-written documents, so make your business plan easy to read and appealing to avoid any issues or disappointments.
- A business plan should be concise, usually between 10 to 20 pages, focusing on the essentials because shorter is often better.
- Organize your document into clear sections so investors can easily find important information.
- Understand your profits by listing all your business costs and matching them to each product or service you sell.
- Carefully check your document for spelling and grammar mistakes multiple times to maintain your credibility.
- Use good design and printing to make your business plan look professional with a nice layout and branding.
- Get everything ready at least two weeks in advance so you have time to make changes if needed.
Business Owners Tips to update your business plan
It’s important to regularly review your business plan, especially if you want to grow your business. Doing new research and updating your plan can help you find solutions to tough questions. Mid-year is a great time to revise your plans and focus on your goals for the rest of the year.
1. Refocus your productivity
Review your business plan to see if you’ve achieved your goals, like starting a video series or limiting your work hours. Focus on the most profitable products or services and use what you’ve learned to improve your business.
2. Realign with your goals
Check if your hard work still matches your original goals and mission. Ask yourself if your goals are still important, where you want to be in a year, and if your current plan will help you get there; this will show you what changes might be needed for future success.
3. Repurpose your offerings
If you’re spending too much time on small projects instead of growing your business, think about changing how you offer your services. For example,Laura’s Landscapers could create a package that combines pool and patio services to attract fewer but higher-paying clients, while also offering maintenance options to keep customers coming back.
