Dear Ney Ney,
If you want to start a business it is a good idea to have a business plan. A business plan is a written report about the business you want to start.
A business plan is a good idea because when you write a business plan it helps you to think about what you need to do to make your business successful. If you think about a potential problem before you start your business you can also come up with a solution to the problem, too.
Many businesses require money to start them. If you want to start a business but don’t have enough money saved, then you will need to ask people for money. These people are called investors, and when you make money in your business you share it with your investors. Investors will only give you money if they think your business will be successful, and the only way they will be able to know that is from your business plan.
Business plans don’t always have the same format, but most usually include: a summary of the business, a more detailed overview of the product or service, a market analysis, an overview of the team leading the business, and more detailed information on the financials of the business.
The business summary briefly describes the mission of the business, the product or service, the team working on the business, and the financial expectations for the business.
Next comes a more detailed description of the product or service you plan to offer or perform. The focus of this section is the product or service. What need does it fill or what problem does it fix? Why is it necessary? If your product is new or innovative, how will it work and how feasible is it to build?
After the detailed description of your business you include a market analysis. A market analysis is information about the market in which your business will operate. A market is where customers and business exchange money for goods or services, so a market analysis might include information about your potential customers and other businesses who provide similar products or services. How old are your customers, how much money do they make, what are their interests, and how do they make decisions about buying the type of product or service that you offer? Who else provides a similar product or service, how many customers do they have, how do they attract new customers, what makes them better or worse than you?
After talking about the market, it is time to give a little bit more information about you and the people you might be working with on your product or service. Many, but not all, businesses are started by two or more people. Why are you and your partners qualified to provide this type of good or service? Have you worked on similar projects before? Have you worked together on anything else before?
Finally, it is time to provide a little information about how much money you expect to make. These expectations are also called financial projections, because you are projecting into the future about the financial state of the business. This section includes information about how much money you will need to spend each month on expenses such as advertising, salaries, office rent, and materials. It should also include information about how soon you expect sales to occur and how quickly they will grow. Based off the information about your sales and your expenses, you should be able to determine when you think your business will begin to earn a profit, or earn more money than it cost to operate each month. Earning as much revenue as your expenses each month is called “breaking even” and your “break even point” is the month in the future that you think it will first occur.
When you start to think about business ideas, you can use the business plan sections to help you think about the idea and decide if you want to pursue it. Even if you don’t plan to or need to raise money for your business, a business plan is a great way to remind yourself what you planned to do when you started your business. Running a business will keep you busy, and without a plan to look at you might fall off track.
One last thought, business plans don’t need to be long. In fact, there are plenty of one page business plan templates that you can use. A favorite of mine is offered by a group at www.leanstack.com and is called the Lean Canvas (https://leanstack.com/lean-canvas).
I look forward to reading and helpings you write your business plans.
I love you.
Dad
