How to write a Business Plan for Your New Business

I went back recently and looked at the business plan I did when I started up my first business. It was close to 100 pages. It was the first time in years I read it. I thought to myself how completely off base I was back then. Things turned out completely differently from what thought. Luckily in a good way.

But that's business plans for you. Things never turn out like you thought they would when you first start a business. The essence of being a small business owner is being able to think quickly on your feet. Taking that unexpected event and turning it to your best advantage. So in some way business plans are a bit of an academic exercise for me.

That all being said I do think you need to have a business plan before you start your own business. The reality of it is even though things change and your small business may turn out completely differently from what you've planned, having no business plan is definitely a first step to failure in business. Now I'm not saying you need to do the 100 page thesis that I did. But you do need to think through some key questions. Those key questions are as follows...

What is your business?

It might sound obvious but you would be surprised how many new business owners I talk to who aren't entirely clear on what there new business is about. What's the product or service you are going to sell, who you are you going to sell it to, what's your target customer and how are you going to service them? Probably even more important that what your business is, is what your business is not. You need to have a think about that because again a sure road to failure is trying to be all things to all people.

What does your first 12 months Cash Flow Statement Look like?

I'm sure a few of you "non Accountants" probably just cringed. But do you know what the number one cause of failure in small businesses is? ... that's right... Cash Flow.

I'll say it again. Cash Flow! Many small businesses on their way to success failed because of cash flow. They simply ran out of money. So don't leave your cash flow statement to your accountant or your friend who is good with a spreadsheet to work out. Actually go through in detail yourself. Understand all your assumptions. Make sure you are being conservative. Most small businesses are cash flow negative for the first 12 to 18 months at least. Do you have enough money to cover yourself for that long? If you are smart you'll take what ever you think you in terms of free cash for the first 18 months and double it. There is always something unexpected that you need to pay for.

What's your Sales and Marketing going to look like?

Ever watched the movie "Field of Dreams" with Kevin Costner. Remember the line "If you build it they will come". Well I've seen a lot of small business owners think that way. They come up with a great idea. Build the product, set up the service, etc. Then after they've done all that they think? Hey wait a minute how am I going to sell and market this?

Unfortunately much of sales and marketing comes down to mathematics. If you are going to need to sell "x" number of things then you need "y" leads which means you need to market to "z" people. So you are going to have to get your spreadsheet out again unfortunately and do some math.

It's at this point you are going to have to work out in detail how much you will have to sell on a monthly basis to make the money you will need to cover you costs and pay yourself. In doing your sales and marketing plan you need to ask some basic questions like how many people will you need to sell your product or service to in a given month. How many leads will you need to generate that number of sales. Where will those leads come from. How much money will it cost to generate those leads and so on. You'll actually find this to be one of the harder things to figure out in your business plan but definitely one of the most important.

What about all the other stuff?

There are lots of great templates on the web for business plans. That ask you to fill out a who bunch of stuff. I'm not saying don't use those templates. Some of them are quite good. If you have an iPad of Android Tablet then the Australian Government even have a very cool Business Plan Application that you can use as well. But your business plan needs to answer these three core questions...

1) What's is my business? What is it not?

2) Will I have enough cash to start up the business?

3) How am I going to sell and marketing whatever it is my business is about?

The depth and degree you go into your plan is up to you. How much time you spend on questions outside of these three key ones is also up to you.

If you are seeking funding from the bank or a venture capitalise then they are going to want to see more detail and something more formal. If you are funding the business yourself then you will probably do less.

But either way have a plan. Because any plan is better than no plan. Trust me on that one!