Everyone knows that if you are starting a business, your first step is a business plan. This is true no matter what size your business will be and what you plan to do. But too often, would-be entrepreneurs get mired in this step and never seem to get anywhere. Especially for a one-person consultancy, how much time should you spend on this before you flip the switch and go?
If you ask ten business professionals what should go into a business plan, you will get 10 different answers. There will be considerable overlap, but there is no one right answer. In this post, I provide an outline of an entrepreneurs’ condensed business plan. If you compare it to the innumerable outlines and lists available online, you’ll see this is very brief. Why? This is the barebones minimum business plan that you should nail down before you hit the go switch. Before you invest in your shiny new business cards. Before you quit your day job.
Later on you need to fill in the content that will make your business plan something a loan officer or potential business partner would expect to see. But for now, consider this your very first step.
There are ten sections to this condensed business plan. Dedicate a full day or two to this, but don’t let it overwhelm you! If a section mires you down, write a high-level answer as best as you can and then move on. If you get stuck, talk with a mentor, partner, or supportive friend to see if you can finish it up. If something I include here doesn’t make sense for your business ignore it and move on. Make yourself go all the way through your business plan, and when you are done you will have a much better understanding of what you need to do.
Here’s a list of each of the sections in your condensed business plan:
- Company Description
- Target Markets
- Competitor Analysis
- Products or Services
- Marketing & Sales
- Initial Goals
1. Company Description
I approach this from multiple angles. If your father asked you to describe your business, how would you answer? What if your neighbor asked? Now what if a potential major client asked? Combine your answers and you should have a good description. It should include at least this information:
- Mission statement: In just one or two sentences (at most!), what do you want to do with your business? Why are you here? (This is the only part of this section that you really should keep as brief as possible.)
- A general statement of what you do. What does your business do? If your answer is “It’s hard to explain,” then you’re not ready to launch yet.
- What differentiates your business from your competitors? What makes your business great at doing what it does? Why should someone hire you instead of someone else?
- How does your business solve your potential customers’ needs (better than your competitors do)?
- What are some of your advantages that you can leverage as you launch your business?
If you are starting a sole proprietorship, you will describe yourself and your pertinent skills in this section. If a partnership, describe all of the partners, their skills, and the roles each person will play and the division of work. For any skills needed to run your business that you do not have – how are you going to provide those? For now, consider this section to be an inventory of your resources so that you can uncover now rather than during a crisis that there is a skill you lack.
This section describes your industry. Specifically, this is the industry of your business – not the industry, or market, that your customers are in. For example, if you plan to offer small business services to the dog-breeding market, you should describe the small business services industry, not the dog-breeding industry.
Has your industry been growing? If not, why do you think you can be successful in this industry? What are the challenges and advantages that businesses in this industry face? With the right amount of research, there is a lot of information you could pack into this section, but for now, just include the information you can easily find that will be helpful for you to consider as you form your business (saving the detailed financial analysis for later).
The Small Business Administration provides links to free research resources that will help you find data for this section.
4. Target Markets
In this section we start to get to the important information that will shape how you run your business: starting with the markets that you will target. Some businesses focus on a single market, and some work with more than one. Note that this is not as specific as your “audience.” For example, someone may target “high-tech businesses” as a market, but then their audience within that market might be developers, trainers, HR personnel, etc.
For each of your target markets, include the following information:
- What is the market
- A brief description that differentiates this market from others.
- What problems does this market have that you will address.
- Characteristics of this market that make it a good choice for you. How will your approach to this market differ from how you’ll approach to other markets. How will your approach to this market differ from how your competitors approach it?
- How does the spending power or business potential of this market compare to the others you are targeting?
- How much of your effort (expressed as a percentage) will you aim at this market? (Note that what you think is the answer to this today may change once faced with reality. Be ready to be flexible!)
In this section you will break down the specific audiences that you will target in each market. Many businesses target more than one audience. If you have more than three audiences per market, see if there is a logical way to group them into a smaller number of categories and prioritize each category as primary, secondary, or tertiary. Remember that you need to identify the audiences in each of your target markets. (Some people may find it easier to combine this section with the previous one – do whatever is easiest for you, as long as you include all of the information for each audience.)
- What is the audience?
- Briefly, what differentiates this audience’s needs from your other audiences?
- Prioritize this audience based on how much of your effort and investment you will aim at this market: typically this is primary, secondary, and tertiary.
- What are some details about this audience that you need to know in order to reach them? What do they like? Where do they go? What is important to them?
- What benefits does this audience want?
- What problems does this audience have that your products or services can solve? What do they need?
- How does the spending power or business potential of this audience compare to the others you are targeting?
6. Competitor Analysis
In this section you will identify at least two of your main competitors in each of your target markets who provide a product or service similar to yours. Ideally you will know who all of your competitors are for each of your products or services in each of your target markets. You don’t want this step to slow you down, so we’re keeping this very light. For now just pick the top two competitors; but when you have the time, come back to this and keep studying the competition. For each competitor (or for a composite of all your competitors) identify each of the following as much as possible:
- What are their key selling points: how are they winning customers?
- Who are they targeting and how will your approach help you win customers over the competition.
- What are the mistakes they have made and how can you learn from them?
- For each of their strengths, how can you make this your strength too and how is your approach better? Or why do you feel it is unnecessary for this to be one of your strengths?
- For each of their weaknesses, how can you ensure this is not a weakness that you will share? How can you demonstrate to your markets that this is one of you’re advantages?
7. Products or Services
In this section you will describe the products or services that you will sell and what makes you the best provider for them. You don’t need to get too specific, for example: if you sell a line of cosmetics, describe the line, not each individual product. For each of your products or service categories, describe the following:
- The name of the product/service or category
- In just one or two paragraphs, describe this product/service including an overview, its features and benefits, and its advantages over competing products/services.
- Which audiences are targets for this product/service?
- How will this product/service provide what is needed for each identified audience.
- What are some key issues in your target markets that are solved by this product/service?
- How will you provide this product/service?
- For products, how will you source your inventory?
- Why should your customers buy this product/service from you instead of your competitor?
- What additional products or services could those purchasing this product/service be influenced to purchase?
- What is the cost to you of this product/service and what will you charge for it.
8. Marketing & Sales
Your marketing and sales strategy will govern the day-to-day running of our business more than anything else. Your marketing and sales plan is a separate full document in itself and will need a considerable amount of your attention (see Goals below for a bit more on this). But for the purposes of this condensed business plan, you should identify at least these aspects:
- As a new business, how will you introduce your business and products/services to your target markets and audiences?
- How are you going to reach your new customers and keep in touch with existing customers?
- What roles in your ecosystem can you partner with to increase sales?
- What is the overall sales tactic that will be best for each of your audiences (and if applicable, for each product/service)? (For example, in-person selling, ecosystem referrals, etc.)
- What are at least three sources of prospective leads for you to get new customers?
- Based on the above information, list the websites, social media, collateral, and other communication tactics that you need to develop.
Some lucky entrepreneurs start a new business because it involves doing something they love to do, but few can afford to do it merely out of love: we need to earn money. This section provides an overview of what you will need to get started and to keep things running.
See Do I Have Enough to Quit My Day-job? for detailed instructions on completing this section.
Caveat: This condensed business plan is great to get potential entrepreneurs started, but is absolutely not sufficient for you to take to a bank or potential business partner. If you need to find investors or other means of finding capital, then you will need a full, formal business plan.
- Determine your initial startup cost, which includes all your basic business setup costs along with what you will need to start marketing your business.
- Determine your ongoing monthly business expenses.
- Determine your monthly minimum sales goal by adding together your total salary needs plus the ongoing monthly cost to run your business and market your products and services. If you are a sole proprietor, then use your personal monthly budget to determine the salary needs. Don’t forget to allow for extra to cover tax expenses.
- Many entrepreneurs need to be plan on lean months when their business first launches and they are building up their clientele. Based on what you know about your startup costs, your monthly sales goals, and the number of months you think it will take for you to reliably reach those sales goals, determine the amount of savings or other sources of income to get you through this launch time.
Your initial goals are not traditionally a part of your business plan, but I am adding this here because, once you go to all this effort, your next step is to get going with the business of running your business.
With your business plan fresh in your mind, what will your first few goals be to get started?
- Get started on your marketing plan: What collateral will you need? Are you going to have a blog? See my post on The Minimalist Marketing Plan to get started. If trade shows will play a part in your marketing, then also see Event Plan: a Tradeshow Primer.
- Write your messaging: For each of your products/services, how will you describe them to customers? What is the best way to position them, and how will you make people desperately want them? See my post Messaging 101 to get started.
- Sales: Where will your first few sales come from? Before you jump in with both feet, write out a plan for what you will do to make your first few sales. Don’t forget to follow up with your existing clients when you get them. How many new contacts will you make per month?
- Client list: Make it a habit to work on your list often, such as weekly or at the very least once every month. Is it up to date? Are you following up?
- Resources: Gather up resources related to your target market, such as people in your network, trade association membership and publications, the Small Business Association, and government documents.
- Plan for growth: Plan on looking back over your plans every quarter, twice a year, or annually to assess where you may need to correct your course and where you can target additional growth for your business.
Moral of the story
There is no one right way to write a business plan, but sometimes you just need to get the basics down so you can get going. If you will need to look for investors or a business partner then you should write a full, formal plan. But in many cases, the solo entrepreneur can get away with this condensed version.
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