A Formal or Informal Business Plan

This is part 2 of  writing a business plan for your home business.

Most home businesses don’t need a formal business plan.  So I like to help my clients put together a simple, succinct, strategy that will accomplish the same purpose as a formal business plan.

If you’re not wooing investors or need a business loan then a formal plan is not necessary. However, a business plan is necessary for every business owner because of what it allows you to do. See A Business Plan For Your Home Business for details.

What’s in a business plan?

Here are the details of a formal business plan. The ones with an asterisk (*) are necessary when you are writing an informal one.

A brief title page- this is a cover sheet that contains the date, business name, address and phone number.

A table of contents

*An executive summary-this is an introduction and describes the purpose of the plan and summarizes the important elements in the body so that investors can quickly access your business and how it will become profitable.

A history of the company-the history of when it was founded, its founder, it’s location, the objectives of the company.

*A description of the products or services-this should also briefly explain why it appeals to your customers

*A description of the market-this should detail your customers. It should also discuss your competitors as well as analyze the industry or market trends

*A description of how you will sell the product or service-essentially your marketing strategy

*An operational plan-how you will produce (or acquire) what you sell, how you will deliver the product and how you will protect your ideas

*A description of the management and organization of the business-Who is involved in your business and their strengths and weaknesses. You should include resumes for your key executives. The purpose is to determine if you have the right mix of talent for success. This sections also includes the business structure (Regular corp, S-Corp, Partnership, LLC, etc.), and explains how investors will make their profits (if you’re writing this to attract investors).

*The financial plan- Here is where you include sales projections,  cost estimates, how you will finance operations and how you determined these projections and estimations. In other words, how do you know you sell 8,000 thingymabops per month? Is this figure based on previous sales, a focus group, test marketing, demographic information? You’ll also need past and projected cash flow statements, income statements and debt-to-equity ratios. Rate of turnover of inventory and receivables may also be required depending on who’s assessing your plan.

The asterisk are the sections that you’ll include on your informal  business plan. I know, it looks like you’re writing out a full business plan. You’re not.

For my clients I use  a form, that I designed, that asks specific questions so that they have a business plan in a day. Once completed they have a plan that clearly defines their goals, allows them to better communicate their business model to family, prioritize costs, and keep track of objectives. I’ll soon make this available here for at a nominal price. (For those of you who know me, you know that when I say “nominal” I mean just that. A new business often can’t afford a $100 item no matter how necessary it is. So I make my services and products affordable for small businesses. Stay tuned.)

Have you written a business plan for your home business? How has it helped you? If not, why not?