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There are many types of business plans out there with many different purposes. In this video, we're going to cover some of the basic purposes of a business plan and why we even need one in the first place.
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[How to Write a Business Plan with Pasan Premaratne: Business Model Basics]
0:01
What is a business plan? The traditional advice when looking to start a business is that you should start with a business plan.
0:04
This is both good and bad advice. At the early stages of starting a business or venture of your own,
0:11
much of your time should be spent doing things and not planning for every outcome.
0:18
It's impossible to know what challenges you will face and whether your plan will work without going out and doing things.
0:22
But there's some merit to understanding the big picture before you set up on your task.
0:30
Let's start by defining a business plan.
0:35
A business plan is a document that lays out the plan for your company for the next 3 to 5 years.
0:38
It mainly focuses on the route the company intends to take to grow its revenue.
0:44
Business plans can have various uses. Let's go over some of them.
0:50
Traditionally, the basic use for a business plan is to plan out the business you want to create.
0:54
This may seem like a great idea but you don't want to be too rigid and stick to a plan.
1:00
You need to be able to adapt. Business plans are also used when you need funding.
1:05
The business plan outlines what your company does and how it plans to make money.
1:11
This helps investors or creditors engage whether your company is worth lending to.
1:16
Business plans can be used to communicate your ventures to people that you want to bring in to the company
1:21
whether it's a co-founder or some of your early hires.
1:27
Finally, you can create a business plan to avoid making mistakes.
1:30
By forcing yourself to think about all areas of the business, you won't leave any stone unturned.
1:35
When first starting out, creating a business plan to thoroughly explore the industry and your idea is a great idea.
1:42
The problem with traditional business plans is that it asks for a lot of forward looking information that we don't currently have.
1:49
Let's look at this small business administration website.
1:56
They have an outline for creating a business plan that we're going to analyze.
1:59
The outline on their site is a very common rubric on creating business plans.
2:03
Here's what it roughly contains--You start off with an executive summary, follow that up with a company description,
2:08
then, you have a market analysis then you have an organization and management structure.
2:15
We talked about your service or product line, then you're going into marketing and sales, follow that up with request,
2:21
financial projections, and any other documents that you have.
2:28
Looking at this, my first thought is wow that's a lot of information.
2:30
Some of that is important to know before you're going to starting a business.
2:35
Things like the market analysis.
2:39
It's important to understand the size of your target market, research your competitive landscape, and industry regulation.
2:41
It's also important to have a basic idea of how you're going to reach this target market with a marketing plan
2:48
and how you're going to execute on it with a sale strategy.
2:54
But a lot of the things on that list aren't relevant. Things like organization and management.
2:57
When starting a company, don't worry about roles and hierarchy. Let that evolve naturally.
3:02
It's also a waste of time to put together financial projections.
3:08
Advance you're guessing since you haven't done any of this before.
3:12
You'll set targets that you won't be able to hit and then you will evaluate yourself against targets
3:16
that didn't really have any solid basis to begin with.
3:22
Instead of going the old school route and writing 20 page plans, what we're going to do is undertake a simple exercise
3:25
that will help us arrive at the necessary information.
3:32
We can then use that information to create different types of business plans that are tailored to the specific business needs.
3:35
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