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Five Steps to An Effective Business Plan
This article may be reprinted in your ezine or on your site
in its entirety so long as the author's credits and all links
Five Steps to An Effective Business Plan
By Vishal P. Rao ©2004
You have an idea for a business. You know what you want to sell, who
you can sell it to, and how much you stand to earn from it. There's
just one more thing you need: a business
Many people dread the idea of preparing a business plan. They think of
them as complicated, unnecessary documents that exist only to make it
more difficult for them to get started as an entrepreneur. They are
Business plans are necessary because they help you "see" your business.
Instead of just talking in abstract ways about your "customer base" and
your "profit potential," it lets you put those things in writing and in
concrete terms. It forces you to think through every aspect of your
business in advance so down the road you don't realize you've made a
mistake that's cost you your business, your life's savings, and your
Besides all of that, they are also important tools for getting other
people interested in your business. For one, if you've taken the time
to create a business plan, others will realize that you are serious
about this endeavor and that it isn't just some pie-in-the-sky dream. A
business plan also shows people that you are a professional and that
you understand what it takes to start and manage a business. This is
all extremely important, particularly if you need any type of outside
funding, such as loans or investors.
So while the bad news may be that you definitely do need a business
plan, the good news is that they don't have to be complicated. The
truth is that your plan only needs to cover seven main areas and
none of these areas are going to require you to write a full-length
novel. These five sections are the executive
summary, the company
overview, the business
environment, the company
description, and the action
plan. All of those sections may sound complex, but most of
them won't involve information that you don't already know.
Even though this section will technically be first in your business
plan, you should actually write it last because, just as its name
implies, it summarizes the entire contents of your business plan.
Because many readers never bother to get beyond the executive summary,
you must make sure that it is comprehensive and well-written.
If that sounds difficult, it isn't. Just make sure to read through your
entire business plan before you start writing the executive summary.
Make a list of information that you think is the most important or that
would really stand out to a reader, and be sure to include all of it in
This section explains the guiding force behind your business. It gives
them a chance to see what you have in mind for the business and how you
plan to get there. Generally, the overview does this by providing a mission statement,
goals, and objectives for your
In a nutshell, a mission statement provides the answers to all of these
questions in less than 50 words: What am I selling? Who am I selling it
to? Why am I selling it? It doesn't need to be just one sentence, but
keep it as brief as possible.
Goals and objectives, the other components of the company overview, are
often confused by first time business plan writers. Remember that goals
are things your company wants to achieve while your objectives are how
they plan to get there.
This section will probably require you to do some outside research
because it involves information relating to your industry, your market,
and your competition. You need to take an honest look at the field you
are preparing to enter and pay close attention to its structure, its
trends, and its barriers to new businesses. Become familiar with the
major competitors in your industry and decide how you will
differentiate yourself from them. Also, get to know your potential
customers and what makes them tick. The more you know about them, the
more likely you will be to turn them into buyers.
At this point in your business plan, you need to go into detail about
your business. You can't simply define your company in terms of what
you sell, but also in terms of who you serve, what resources you will
use, what types of employees you are looking for, what type of
distribution method you'll utilize, and more. All of this factors
combine to create your company.
In addition to this, you should also state your company's UPS (Unique Positioning Statement).
This is a one sentence statement that explains what sets you apart from
all of the competitors.
The last part of your business plan is this section which outlines the
steps you need to take now in order to make your plan work. These
should also reflect the goals and objectives that you've outlined in
your company overview.
Besides these primary pieces of a business plan, you may also need to
include a financial
section, particularly if you plan on using it to get
outside funding for your business. This may take more thought and
planning than the other sections because it will require you to make
some assumptions about your business's revenue potential. The most
important thing is to base any estimates on realistic expectations, not
You may want to visit the following websites for some samples to give
you an idea of how things should be formatted and worded:
With some useful models and this helpful information, you'll be well on your way to completing your effective and professional business plan.
About the Author:
Vishal P. Rao is the editor of Home Based Business Opportunities - A
website dedicated to opportunities, ideas and resources for starting a
home based business. Visit him at:
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