To create an effective plan, you have to gather together and organize a lot of specific information relating to your business, your competitors, and the market you hope to reach. There are many potential sources for that information.
Assembling a written business plan is more than an exercise in translating your thoughts to a printed page. It also involves gathering and organizing specific information relating to your business and to the market you hope to reach. There are many potential sources for that information.
- Business records. For an ongoing business, various documents and records generated in the course of your operations are the first source of information. Analysis of your present situation will generate much of the data that you need if your business has been established for awhile. For startups, you'll need to look at your current personal financial situation.
- Marketing data. Marketing data for your industry and your products or services can be collected or obtained from a number of sources.
- SWOT analysis. A SWOT analysis can help to organize your thoughts and assess where your business stands in the market in which you want to compete.
Analyzing your current situation
Whether you're in business now or you're still in the planning stages, the starting point of writing a business plan includes a thorough analysis of where you (and your business) stand.
It is important to consider your current financial circumstances, including your personal and business assets and liabilities. For the business, you may want to make a detailed assessment of your current financial position to gain some insight into how to gather and analyze the required information. You'll also need to determine how much you personally can realistically invest in the business (or how much the business must contribute to your personal budget).
If you're currently in business, you'll want to create a snapshot of the business's activities, personnel, operating methodology, and other nonfinancial factors. This is particularly important if the business plan you're working on involves expanding the scope or extent of the activities that your business performs. If you personally participate in or direct those current activities, consider how much time you will and your employees will have for the newly planned business idea.
New businesses must project certain information
If you are starting a new business, there is a broad class of information that won't be available to you because it doesn't exist. An existing business can look at its financial and operating history to make decisions regarding the elements of the plan. An existing business that is creating a plan or updating an existing plan has an edge over a new business. The existing business probably has account books, a compendium of customer and supplier information, copies of tax and other government forms, payroll and personnel records, and perhaps previously prepared cash flow projections.
An existing business owner has probably also developed a feel for how the business is doing. This subjective perception can play an important part in your consideration of ongoing operations. For example, you may feel that you aren't really being compensated at a level that is appropriate to the amount of time you put in. A business plan that calls for you to continue working long hours should establish that the benefit derived from implementing the plan will be worthwhile.
If you do not have a business history to examine, it's probably safe to assume that you have some knowledge regarding the type of business that you are considering. If you're striking out on your own in the same line of business as your former employer, what you learned as an employee may be right on point for your new business. You may also find what you need by researching your industry using the vast amount of information available online or at your local library.
Reviewing the market and marketing data
Whether you are expanding an existing business or starting a new one, there is likely to be substantial information available regarding the market you wish to reach.
You might also want to review material relating to market research to get some idea of the many ways in which you might gather relevant data. As a small business owner, you may not have the time and money to conduct a lot of research or to pay someone to do it for you.
Nevertheless, you can obtain useful information from sources such as local chambers of commerce, industry trade associations, and current business owners. The recent round of re-engineering that has swept across the country demonstrates that businesses are frequently willing to share the "secrets" of their new-found success.
Vendors and lenders are also good resources when assembling information about the market. Lenders are knowledgeable about the local business climate. The existence and number of vendors (if relevant) who are interested in trying to get your business can also be a useful indicator.
Conducting a SWOT Analysis
A SWOT analysis is an analytical tool that can help you work through the information you have about your business. SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. This type of analysis represents an effort to examine the interaction between the particular characteristics of your business and the external marketplace in which you compete. Many of the conclusions that you draw as a result of the SWOT analysis can be incorporated into the market analysis and market strategy sections of the business plan.
The internal portion of a SWOT analysis looks at the individual strengths and weaknesses of your specific business. For example, you may have a favorable geographic location that makes you more accessible to customers than your competitors. You may have invested in state-of-the-art equipment that only recently became available. On the other hand, you may have problems managing your inventory, or you may have employees who just aren't up to the tasks that will be required to implement your plan.
Similarly, the external portion of a SWOT analysis looks at the opportunities presented by the marketplace and the threats that you face in your chosen market. Try to be as accurate as possible in assessing the market environment in which you do business. Identify those areas in which your competitors pose a threat. The SWOT analysis is discussed more fully in the context of marketing.