3 Keys To a Simple and Effective Business Plan

2013-06-20 15:34

For the past year I have been the founder of Problemio which creates mobile apps that help people plan their businesses. One of the most common difficulties our users face is simply not knowing where to start when it comes to planning their business.  That should not be the case. Writing a business plan is actually pretty simple, and in this article I am going to explain the three fundamental sections of a business plan which make up the bulk of everything you need to have a good business plan.

Only 3 important sections

There are many sections of a typical business plan. But 3 of these sections carry 80% of the importance, and will matter most in practice. They are 1) Your product or service 2) Your marketing plan and 3) Financials consisting of your costs and how your business will earn revenue and profit.

Simple, right? You make a product, promote it, and hopefully bring in more revenue than you have costs. If you get this right, not only do you have a business plan, but you also have a business!  Let’s start by going over your product description.

How to describe your product: be brief and clear

Many people feel that they need to use big words and make complicated sentences in order to seem sophisticated when writing their business plan. The opposite is true. You must be very clear and very organized when you discuss your product so that whoever is reading your  business plan understands what you do. If they don’t understand what exactly the product is, or if you bore them, they are less likely to continue.

Take a look at this tutorial with business pitch examples for a way to be able to quickly and effectively explain your business. Once you can quickly and effectively articulate your product and business, you can move onto the section of your business plan where you discuss how you will market and promote this product, service or business.

Marketing

I won’t mislead anyone. Marketing in today’s business environment is not simple. Web marketing is getting increasingly complicated to the point of needing technical skills just to begin doing some of it, and while offline marketing can at times work well, in most cases it doesn’t scale and isn’t enough on its own. For a complete marketing strategy you need to make the best use of online and offline marketing opportunities.

While most of our company's products are paid, we provide a couple of free mobile apps that help you learn about marketing fundamentals. Here are our iOS marketing app and our free Android marketing app to help get you up to speed on marketing fundamentals on some online marketing techniques.

Once you have a solid marketing plan, it is time to think about your financials. Financials sound intimidating, but don't worry, we'll try to make it simple.

Financials

It is important to understand the financials of your business as deeply as you can. In this section of your business plan, you need to go over your costs to start, your costs to maintain operations on a monthly basis, and the strategy by which you will bring in revenue. This may sound complicated, but doesn't have to be. Let's consider these one at a time.

First, consider your costs to start the business. There should be no surprises here. For most businesses, all costs are relatively obvious and their prices are easy to find out. The same is true for the ongoing costs after you start your business. The biggest costs tend to be renting space, remodeling, buying inventory, buying equipment, legal fees, and hiring employees. It is up to you to know which of these your business will need, and you need ot research some of the particular costs.

The tricky part tends to be how you bring in your revenue. You need to think about how your business will earn revenue, and whether your marketing efforts will bring in enough new customers to allow your business model to support you financially.  Once you have a good sense for your business model, and a solid marketing plan which will help you bring in enough clients to have that business model earn enough money for you, you are set.

Do you need a formal business plan or just a basic plan?

The techniques described in this article would help you plan your ideas and get organized. The business plan must be more elaborate if you are planning to hand it to a financial institution in an effort to raise money.

But as it plays out in the real world, the need for a formal business plan is very rare. Most investors do not immediately ask for a full business plan, and when they do ask for documents, it isn’t necessarily a full business plan because they don’t have time to read elaborate documents anyway. They usually begin by asking for  a brief document that explains the core of your business, and if they are interested, they each have a unique approach to how they like to proceed, and what they like to focus on in your plans. So while you often do not need a formal business plan, the techniques described in this article can be used to plan and evaluate any business idea you have in the future.

Conclusion

Keep in mind that to have a good business plan, you need to mostly focus on just three sections: your product, how you will promote it, and the finances of the whole operation. The quality of your plan depends on how deeply you understand the issues associated with your product, marketing and financials of your business, and how clearly and effectively you communicate that information.  If you plan these three sections well and they end up working well together, you will be off to a great start.

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