As the new year begins, many small business owners will evaluate and update their business plan. This is an important step for any growing business; evaluating goals, celebrating successes and examining shortfalls is critical for any business to thrive in the future.
What are some things you should consider when either refreshing your business plan or writing one for the first time? Here are five tips for developing a winning business plan:
Half of new businesses will close within the first five years. Make sure yours is in the half of new businesses that stay open, even in difficult economic times. A detailed and comprehensive plan can mean the difference between celebrating your sixth year in business or hanging up the “closed” sign for good.
1. Devote time to your business plan
The business plan is the primary tool of any entrepreneur. As such, it shouldn’t be taken lightly. Take the time for extensive research and learn about the market. That means talking with prospective clients and considering what potential competitors are doing when you are writing your plan. Just having a great idea isn’t enough.
2. Integrate your support network
The network of support that you develop for your business, including your bank, your insurer, your lawyer and accountant, among others, can be very useful and save you time and headaches when drafting your business plan. For example, ask the manager of your bank branch in advance about the financial requirements of the business plan, and then discuss them with your accountant or financial advisor.
3. Identify the weaknesses of the business, and eliminate them
In the research and development phase of the plan, you will notice the strengths and weaknesses of your idea. Take advantage of this stage to consider solutions to these weaknesses and analyze whether your business will be successful in spite of them. Thinking of opening a store? Ask yourself if there are enough parking spaces on the premises. If the answer is no, then your business plan should consider offering valet parking, and detail the cost in the plan.
4. Do not underestimate the competition
You might think that your business idea is unique, or that you’re the best at what you do and can’t fail. Having confidence is important, but only a good competitive analysis of the market and the competition will give you the assurance that your product or service really has potential customers. It is one of the most important topics in your business plan. Last summer, we suggested four ways to be more competitive in your market.
5. Don’t be afraid of numbers
The more details you include in the financial section of the plan, the more accurate your financing estimates will be when you ask your bank or other potential investors. Pay special attention to the unforeseen or variable expenses, such as utilities including electricity and water. Ask other business owners about any surprises they have encountered along the way so you can learn from those mistakes. When calculating costs be as specific as possible so you don’t run out of cash flow during the first leg of your entrepreneurial race.
Above all, remember that your business plan isn’t written in stone. It should evolve with your business and with the conditions of the company and the market. Check back with your plan and goals in three and six months to see how you’re doing, and to stay on top of your business environment.
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