So you’ve found that a market exists and are ready to move forward with your business. Before you jump in, I strongly recommend that you put some time and thought into a business plan. Having one will increase your odds of success as you’ll have a better understanding of all aspects of your business and what you are really committing to.Â While you’ll likely come across some unexpected twists and turns on your way to success, having a roadmap will help you get there, gauge your progress on the way, and help you plan for growth and an exit plan if wanted.
Please don’t think of writing a business plan as a daunting task. It’s not going to be. In fact, if you’ve done much of the work already if you followed the last few posts. Also, unless you are looking for outside investors, this plan is really just a roadmap for you so it can be simple.
Listed below are the elements that make up a standard business plan. You do not have to do all of it and there are so many different views on how best to organize a business plan, so look at some examples and figure out what would be most useful to you. That said, even if some of these seem quite obvious to you, you might just write them down anyway as it will be interesting to see if you have the same perspective in a year. Since I am certainly not an expert in writing business plans, I’ve provided links to good sites throughout. Use what you find most useful.
Statement of Purpose or Executive Summary
While this section goes first, you usually write it last as this is the where you write the purpose of your business plan and a quick summary. A hard thing to write if you don’t yet have a plan to summarize. This is the section you might change for various investors. It should answer the following questions:
- Â What is the business? What are the objectives?
- How is the business structured / organized?
- Who are the principals involved?
- What is the total amount of funding needed to implement the plan?
- How will the funds be used and benefit the business?
- How much of the funds are being requested from this funding source? At what terms?
- What other sources of funding are being considered?
- How will the funds be repaid?
- Why does the loan or investment make sense?
- Is there an exit strategy and, if so, what is it?
Don’t worry if you don’t have the answers to these yet. You will! This is also where you’ll first provide your business name. When choosing a name, think about if you’ll want to ever sell your business one day, check if the name is already registered with the state, and check to see if you can get a suitable URL before you commit. For help on this section, check outÂ Writing an Executive Summary.
This is where you get into the meat of what your business is and what you know about the industry, the market, and the competition. Much of this you’ll already have an understanding of if you’ve gone through my prior posts. Here are the elements you could include in this section:
Mission Statement – The definition of your business at the most basic level. For help, check out Writing a Mission Statement
Industry Background – What is this industry and how is it successful? Keep this quick and simple. Here’s some simple industry information.
General Description – Explain exactly what your business will do, who your target market is, where you are located, what your business structure is (check outÂ Choosing the Best Ownership Structure for Your Business), how you will differentiate, how you will staff, and what particular services you’ll provide. This is a key section and will prove most useful to you later on. For help, check outÂ How to Write a Business Description for a Business Plan.
Potential For Success – Call it what you will, but this is where you explain how your company will be successful. Summarize the findings of any research you have done to back up your reasoning. You may want to pull soundbites from some of the people you interviewed. Explain what you will need to make to break even (using the break-even analysis spreadsheet), and what the risks are (to show that you are aware of them). For more guidance, readÂ How Will I Profit?
Resources – Here’s where you breakdown resources you’ll use or build to make your company a success and how you’ll best use each resource: funding, physical items (e.g. car, computer, printer, smart phone), staffing, software, reputation, and organizational structure. Think about anything you’ll need for your company and then explain why you need it.
Now you’ll want to pull demographics to show where your target market is, how and why you’ll price your services in whatever way you decide best, who you feel your competition is, and how you’ll differentiate from that competition. Here is the least daunting market analysis article I could find:Â Writing a Business Plan – Market Analysis.
Stages of Development
This is the down-and-dirty walkthrough of how you are going to start the company and what stage you’re in now. You’ll explain how you think you will get your first clients, manage your projects, hire staff, control quality, set up your legal documentation, get your insurance, etc. In a way, this is more of a checklist of all the things you need to do and it will help you feel less overwhelmed once you start following it. For more, check outÂ Business Startup Checklist.
Here’s where you’ll break down your daily operations. How do you think your business is going to work on a daily basis? I look back at my business plan and I realize that it didn’t work at all like I expected, but this proved to be a useful starting point for me. I thought I’d use a particular software program to run all projects through, but ended up using a variety of programs and adapting operations to my staff and clients. You’ll also want to explain how you’ll do accounting (self-managed or third-party), what are your contingency plans for various possible daily emergencies, and what your hours and physical address are.
How do you think you’ll market your company? You’ve already defined your market and shared your rates so now give more detail as to how exactly you will market your business. Will you build a website? Will you rely on print ads? Remember that this is your initial plan and that it is likely this plan will change. Learn more atÂ Market Strategies.
Organization and Management
How will you hire and train your staff? What will you include in your employment agreement (e.g. attire, compensation, code of ethics, etc.)? Who will manage the company and what are their (or your) qualifications for such a role? I do feel some of these articles are too heavy handed, but if you want to know more check outÂ Operations and Management Plan.
Critical Risks and Contingencies
What are the possible “worst case scenarios” and how would you respond? These aren’t the daily emergencies, but more the big stuff: competitor takes your clients, you don’t build your business as quickly as you expected, your marketing isn’t successful, etc. Try to think of the most legitimate risks to your success and how you’ll deal with them. Thinking about these risks and having an idea of how you would react to each will impress upon any potential investor that you’ve really thought this through and, well, show that you’re ready for whatever comes your way! Can’t think of any, here’s a list of possible risks:Â Risks and Contingencies.
Objectives and Milestones
This is also a key section as this is where you give a timeline of your milestones, such as when you will have your first employee, your first client, the month you’ll break even, etc. It may also have the priorities you intend to keep, such as keeping specific hours, providing consistent quality service, etc. Here is an article that explains why these are so important and some help in how to write them:Â Objectives of a Business Plan.
Summary and Conclusions
Exactly what is sounds like and likely not necessary. Add if you want to make one last selling point to a prospective investor.
You are almost finished, but some of the big items are still coming up. The financial data section is where you break down your costs and your projections. It’s time for the numbers:
Start-Up CostsÂ - Remember all those items you thought you’d need? The accounting fees? The insurance? Figure out all your initial expenses and how much working capital you feel you’ll need to make it 3-6 months without income. Be realistic about your numbers: how much do you really need to spend on a computer, business cards, or a website? Also, remember costs like training your initial employees and paying any legal fees. Bplans has a nice article on this:Â Estimating Realistic Startup Costs.
Break-Even Analysis – I personally get excited with this spreadsheet as this is where you learn how little you really need to work to profit. It is amazing how little overhead a personal concierge really needs (check out my earnings post). You’ll want to show how much money you’ll need to make in a month to break even and how many hours that is equivalent to. Learn more with Bplans’Â Break-Even AnalysisÂ or here is aÂ free template.
12 Month Profit and Loss ProjectionÂ - This is the mother of all business spreadsheets and, by far, the most difficult and most necessary to do. This is where you bring in every possible expense and revenue for the next 12 months. It isn’t difficult to figure out what your costs might be and fixed costs are easy, so the challenge is estimating how quickly your variable costs and revenues will change over the course of the year. Many investors skip straight to this page first as it gives the most in-depth explanation of how much you’ve thought about your company and how optimistic/realistic you are about the companies earnings. Be sure to keep careful notes of your reasoning and research and people are bound to ask how you came to your numbers. Here is aÂ free template.
Cash Flow Projection – Since you aren’t selling a product or have anything that would particularly shock your cash flow, and since this is already a lot of spreadsheets for a budding personal concierge firm, I wouldn’t do a cash flow projection unless you are looking for some funding. All the cash flow projection shows is the incoming and outgoing cash each month and what your checking account balance is. If you want to do one for your business plan, here is aÂ free template.Â I do want to note that a cash flow projection is very important once you start your company as it will help you see the tough times before they hit and show you money leaks you may not catch otherwise. For more, read The Importance of Cash Management.
You are now finished with your business plan and can add, if you wish, supporting documents such as your resume and your company operating agreement. Oh yes, the operating agreement. While there are plenty of sites that provide operating agreements, please have a lawyer review this agreement as it can save you a great deal of headache and expense down the road.
WHEW! That’s a lot to cover and, yes, it will be a lot of work. But your excitement for starting your own company will push you through it and you’ll be a stronger concierge for it. Remember that, even though this seems like a lot, your business plan shouldn’t be more than 20 pages long with addendums and preferably would be less than 10 pages…so it’s not a lot of writing, but more critical thinking and decisions about how best to run your company.
I feel like there is so much more I want to share before posting this but realize that I may never get to telling you to write a business plan if I don’t tell you now. So please bear with me, I’ll provide much more detail on many of these sections in coming posts and hopefully when it serves more use as you’ll likely be running your company then.
Good luck and please let me know how it goes!
Here are some sites worth checking out if you need more information: