Angela had heard it so often that it sounded like a mantra: Write your business plan!

The business itself was not an issue. It was going to be a business featuring her handmade butterfly inspired caftans. Her creativity was inspired by the spectacular Monarch butterflies that settled in her home town every year. She had the colors and designs ready. Now she needed to open her business.

That was the first thing that stopped her. What kind of planning did she need to do before opening her business? What licenses did she need? What taxes would she have to pay? Who were her clients going to be? What kind of profit could she make? Where could she go to get information? She got dizzy thinking about it. She was an artist, not an entrepreneur!

SCRIBBLES AND NOTES

So she sat down to write her business plan. She figured costs and taxes and leases and employees and advertising, working through a series of worksheets, step by step. She busted a few pencils, but never got near a computer. She even went to her local banks and met with two different bankers. And when she finished, she had an amazing discovery: she didn’t even want a real store to start out. She wanted to start out on the internet. She figured that the international potential of millions of customers, plus the low overhead of an internet business, made it a better option than opening her own brick and mortar store.

So that is exactly what she did. That was nearly two years ago, and she has done very nicely.

THE FORMAL PLAN

But now she is writing a second plan for her business. Now she needs to expand and hire seamstresses, probably contract workers. And so many people have asked if they could come by her store that she now needs a store/workshop. She is really looking forward to the store as a way of working directly with some of her clients.

But now she needs financing, so she is writing a new plan for her business.

Rightfully, Angela knew that the plan that she created for herself just will not do for bankers. The one she wrote for herself was very analytical, with lots of options explored and lots of worksheets. Now that her direction is in place, and a successful track record backs her up, the business plan she is writing is of a very different sort. This one is a sales presentation for the banker. She is even putting lots of photos of her designs.

Angela instinctively knows what many entrepreneurs struggle with: The business plan that you do for yourself is NOT the business plan that you can use for funding.

APPLES AND ORANGES ARE BOTH ROUND, AREN’T THEY?

This sounds so very basic, but many entrepreneurs simply miss the mark. For example, in the business plan you do for yourself, you want to list out all the competitors that you might have, and compare your own business to theirs. Some of them, truthfully, might even be better than your company. But in a business plan for financing, the object is different. Here you acknowledge that there is competition, but the focus is on your business with your clientele base.

Or in your own business plan you may list that you have money in a credit card that you can pull if necessary. But bankers don’t want to hear about that: it is poor business to use your credit card to finance your business.

The two types of business plans are a different mind set, a totally different approach. One you pick right off the tree, and the other you wrap into a fresh hot tart.

WHY, O WHY, O WHY O?

So your first job is to answer the question: Why am I writing this business plan? Am I investigating a business, and looking for the best options? Or am I writing this for a banker/investor?

Once you’ve got the answer to that question, the rest falls into place.

… PUTTING ON THE RITZ

Once you have your scribbles and notes, getting everything together for the formal plan is much easier. You know where to look, what information is valid and what is not, and you probably have a track record behind you that you can flaunt a bit.

VARIATIONS ON A THEME

Sometimes entrepreneurs will look for microloans, or approach Aunt Lizzie for a loan, or do any number of other things that need a more refined business plan. That is great. Just target the business plan to the intended audience, and you will hit all the right notes.

Whether you are a veteran business owner, have recently begun your own venture, or are still in the dreaming stages, you have invariably spent many hours thinking about and envisioning your organization. While it is always exciting to try to realize your dream in your mind and to project that image into your future, the realization that barriers, stumbling blocks, and necessary “to-do’s” exist. These subjects range from broad to very specific, and can include questions such as:

• Who is my ideal client?
• What would be a good name for my organization?
• What is my unique selling proposition (USP)?
• How will I balance my work life with my personal life?
• How big do I want this business to be?
• Do I have the necessary resources? If not, where can I get them? If so, how do I most effectively utilize them?

The list goes on for pages and pages; indeed, there are numerous resources that outline these very details, and putting some time into exploring these ideas is always a smart move. For some specific ideas, check out some of the free articles on offer by MEG Enterprises.

The reasoning behind developing a business plan for businesses of all sizes can vary, but business plans are most often created for two primary reasons: as a management & planning tool, and to acquire funding for operational business needs.

Management & Planning Tool

If you are like many other small business owners, you are not only the owner of the company, you are likely also actively involved in the day-to-day operations as the President/CEO, the marketing department, the IT department, the HR department…the list goes on and on! One of the most important things to remember in trying to bring all of this together into a cohesive and efficient package is that planning is vital!

Many small businesses take a “fly by the seat of your pants” approach to operating their businesses. For example, let’s say that an excellent business opportunity arose for you, an opportunity that would net your business $5,000 over the next 3 months. However, in order to take advantage of this opportunity, you need an initial cash outlay of $1,000. Do you have the resources necessary to take advantage of this opportunity? If your answer is no, you may have been able to easily accomplish this goal by planning for such expenses in advance through a business plan. Even if having cash at the ready is not a viable alternative for you, you may have planned to have a line of credit available for such opportunities, knowing that in your field these opportunities do arise from time to time.

In a more broad sense, business planning helps businesses of all sizes to deal with the day-to-day needs of the organization by forcing the owner to weed through the operations of a typical work day. Business planning will assist you in understanding how to effectively market your business, how to understand and plan for financial stability both now and in the future, how to carry out your daily operations with a necessary level of routine, and so forth. Moreover, while unpredictable issues will certainly always arise, effective business planning will not only help you to navigate the predictable operations, but will also take these unpredictable situations into account. This will help you to deal with these issues with a level of comfort and ease, knowing that you have thought through and planned for such events.

In essence, here is a great way to think of superior business planning. Imagine you are taking a road trip from California to New York. No planning (“flying by the seat of your pants”) would involve you getting in the car and driving “East” on every freeway you come across. Adequate planning would involve mapping out your course, planning where to stay overnight, where to eat, sights to see, and so forth. This is a much better plan indeed. However, a superior plan would take all of these ideas to the next level by planning for “what if”: what will I do if I get a flat tire, if I run out of gas, if someone gets sick, or if I lose my wallet? You can see how the superior plan is clearly the best in most situations in that it allows for flexibility, plans for the expected and the unexpected, and allows you to spend more time enjoying the trip, knowing that you have all of your bases covered.

HELP…I Need Cash! (AKA Creating a Business Plan to Acquire Funding)

Another reason to create a business plan is to acquire funding. In today’s struggling economy, having access to cash as a small business is vital. In developing plans for this reason, a much more specific approach is taken. Here, the plan is created with a specific reader in mind: the lender. Whether seeking funds from a bank, an angel investor, or so forth, knowing your audience is vital.

How do you create an effective business plan in this situation? Well, simply stated, place yourself in the shoes of the person lending the money. What would you as the lender want to read in a plan? First and foremost, these individuals want to see that you have demonstrated the ability to repay the loan with the required level of return on investment (ROI) and within the required time frame.

These areas require that you present a strong case for your proposed financial expectations, grounded firmly in the supporting information of your plan, including marketing, market analysis, business operations, and so forth. Having confidence in your business and in yourself will assist you in demonstrating the potential for your company and in being able to deliver what your investor is looking for. Doing your due diligence and knowing the facts surrounding your business and your market will prove to be of great benefit when selling your business case, both in writing and verbally, to the lender you are seeking funding from.

So, How Do I Create A Business Plan? What Does It All Come Down To?

Although the term “business plan” conjures many negative images in the eyes of some business owners, taking a step-by-step approach will prove that creating a business plan is much less daunting than one might imagine. Although no two plans are exactly the same (the necessary details of the plan can vary between companies), the contents of a typical business plan include the following topics:

• Executive Summary – Sell your business to your reader!
• Business Overview – Giving a general summary of the business.
• Market & Competitive Analysis – What environment are you competing in?
• Marketing & Sales Strategy – How will you “win” in your market?
• Organization Plan – How is your organization structured?
• Financial Projections – Current status and future outlook.
• Funding Sought (if required)
• Key Milestones – What are your specific & achievable goals?
• Critical Risks – What keeps you awake at night?
• Appendix/Attachments

Does this look like a lot to you? Well, believe me, as you truly delve into the details of the plan and your business, you will be wondering why there isn’t more room for details!

The most important aspect of business planning (the “What does it all come down to?” part), however, is spending the time to do your research (“due diligence”) and critically thinking about these various aspects of your business. Of course, it is impossible to anticipate every detail simply by spending time thinking and writing; it is for this reason that plans are referred to and viewed as “dynamic”. However, the more issues and scenarios you are able to come up with ahead of time, the more prepared you will be to handle these as they arise.

So, in the end, I encourage you to realign whatever preconceived notions you may have of the business planning process and view it not as a daunting task or a necessary evil of running a successful business. Instead, view it as yet another opportunity, the chance to help make your dreams into a reality by mapping out the needs of your business, your customers, your employees, your suppliers, your community…and yourself!

You want to write a business plan for your product but you don’t know where to start. Inside you’ll learn how to make a simple one sheet business plan.

Go get a piece of paper and a pen or better yet, print this article out.

1. What is Your Product or Service

This is your business idea or the product you want to sell. You can sell cakes, mow lawns, sell crocheted hats, or pillowcase dresses, it doesn’t matter what it is, just write your ideas down.

How does your product or service differ from what is already out there?

Assignment:

Go to a store and find a product. How many choices do you have? Which one do you choose? Why?

Some choose because of personal experience with the product, some choose based on packaging or on an advertisement. Others choose based on how it will make them look to their friends or it inflates their ego making them feel good about themselves.

Service products like mowing lawns are different. You need to do what you advertise, do it well, do it on time, and be reliable. Go the extra mile – maybe you can offer one free mowing if the account is paid-in-full for the month.

2. Name Your Business

The name of your business and/or product should be unique, memorable, and easy to pronounce. For example, in America we pronounce Adidas as Uh-deed-ahs while in Germany where the company is pronounces it Ah-dee-das.

Read 15 more well-known brand names that get mispronounced on Business Insider – businessinsider.com/mispronounce-difficult-to-say-brands-2014-9.

Jason Miles, Author of Craft Business Power and co-owner of Liberty Jane Clothing suggests naming your company a proper name instead of some cute insiders only name.

Can you guess the product of the business names below?

Liberty Jane Clothing vs. Momwithahook

In the first example (Liberty Jane Clothing) you know right away that the product is clothing. The name suggests that Liberty Jane may have something to do with the designs.

In the second example (Momwithahook) it is questionable what the product is. Does this mom sell fishing equipment, hooks, pirate themed merchandise? This is my username online as I enjoy crocheting, use a crochet hook, and am a Mom.

Not knowing this about me and not knowing about the hobby crochet you might be clueless about what exactly I’m offering. A better option might be Sara’s Crochet Patterns. You know who I am and what product I sell.

Assignment:

Take some time to come up with a variety of business names. Make sure it describes what you do and your product without confusing or misleading your customer. Use Jason’s suggestion of adding a proper name, it doesn’t need to be yours but it will help.

3. Target Market or Your Customer

Who wants or needs your product or service? It’s important to get this right so you don’t waste time and money.

Considering your product or service – mowing lawns – who is your customer?

– the elderly

– those incapable of doing it themselves

– busy people

– vacation homes

– houses on the market

Assignment:

Take a sheet of paper and divide into four sections. Label the sections Type, Where, What, and Willing.

Now add the type of people who use your product or service, where you will find them, what is most important to them, and whether they are willing to pay someone for it.

4. Getting the Word Out or Marketing

How will your customers know that you mow lawns? Will you create a website? Will you ask friends and family members? Will flyers be a good way to let people know what you are doing?

Assignment:

Brainstorm ways to market your product. For the mowing lawns example, what would be the most beneficial means of getting the word out?

– Churches

– Clubs

– Schools

– Neighbors

– Friends

– Craigslist

5. How Much Will You Charge or Pricing

In any business profiting is the goal. You need to price your product or service competitively and profitably.

Consider the costs of running your business and shipping if you are selling a product online.

Assignment:

Find out the cost per unit made. To do this you will need to do the following:

– hourly overhead costs

– hourly wage

– total hourly wage = hourly overhead costs + hourly wage

– how long does it take you to produce one item (use toggl.com to time yourself)

– total materials cost (everything that goes into to making your product)

– add an extra 10% for unexpected costs

– total price = time to produce one item + material costs x 10% unexpected costs

Read more on pricing your products on TheDesignTrust.co.UK. You might also find this calculator handy: craftscalculator[dot]com.

Assignment:

Time yourself making your product or completing your service. How long did it take? Determine the cost per unit made for your product. For a service based business, how long does it take to complete the project? Add some extra cushion to this for the unexpected.

6. Determine Your Profit

This is the fun part. To get your profit subtract your expenses from your income.

profit = income (sale price) – expenses (materials cost)

Assignment:

Sit down and find the profit for each product or service you plan to sell.

7. Delivering Your Product or Service (Distribution)

This step could also be done between step 3 and 4. Once you know your target market (who will buy your product) and where they are you need a plan for getting your product to them.

Do you sell locally? Will you deliver? What shipping company will you choose?

Products

Choose a shipping company that is reliable and cost-effective. Start small at first by utilizing the United States Post Office or your Postal Carrier.

Decide whether you will ship internationally. Who will pay the customs fee?

Services

How will your service be rendered? Will you go to your customer or will your customer go to you?

Assignment:

Research various shipping options for your product. Try shipping your item to a friend. How did it arrive? Was it damaged? How long did it take?

Sometimes the cheapest way isn’t always the best way.

Conclusion

You should now have a well thought out business plan. This isn’t acceptable for bank loans but it will guide you in starting your own little side business.

And now I’d like to invite you to read more on business and blogging for small business.