In my experience, a sizable number of prospective clients come to the SBDC seeking grants/loans to realize their dream of creating and owning a small business. Many clients may have already met with a prospective lender who often introduces them to the need for a formal business plan, and subsequently points them to the SBDC. (Sidebar -- business bankers are a great source of SBDC referrals!)
Regardless of your industry, (restaurant, cannabis, food truck, coffee shop, daycare, or tech startup), my advice to clients who intend to either seek a loan or self-fund their new business is the same – you need a formal business plan. Whether starting a new business, expanding an existing business, or simply introducing a new product or service, it’s a best practice to start with a plan – a business plan. To some, developing a business plan may seem like an extremely time-consuming and unnecessary task. But it’s time well spent. Business plans can range from the simple to the complex– but should include the same core elements. Here are the 7 Critical Business Plan Elements:
What is your business all about and why does it – or should it – exist? What benefits does it provide? And what problem does it solve?
What, specifically, is the product or service you’re offering? What is your USP – Unique Selling Proposition? Not just an Italian restaurant, but perhaps, an Italian bistro with a specific menu, and items, not typically found in your town, as well as appealing to people in a certain specific way. Include those unique points that differentiate your product or service from others.
What is the market for your product or service? And is the market sufficiently large for you to generate cash flow, succeed, and remain profitable? Where will your customers come from and for what geographic area does your market extend? What type(s) of businesses or individuals does your product appeal to?
What level of competition will you face and how will you effectively respond to that competition? Consider not just the direct competition, but all substitute products and services that may represent threats to your sales. Following through on the Italian restaurant example, you’ll need to consider not only other/similar ethnic restaurant types but emerging competition like upscale food delivery companies and the share of the market they have. Look at each competitor’s strengths and weaknesses and consider how your business is positioned against that competitor. As with other elements of your plan, be honest – and be specific.
Your mission statement, (and perhaps, vision statement), and goals define the objectives that will drive all of your activities. This mantra provides clarity of purpose as well as incentives for motivating staff, and they serve as milestones by which you can measure success or identify areas for remedial action. Your objectives support your goals. While your goals should be broad: e.g. “Increase margins in NE territory.”, your objectives should be specific and should support your goals: e.g. “Grow the luxury bedding product line market share by 15% over the next six months in FLA / GA areas.”
How do you intend to market your product or service? Your marketing plan should describe how your target customer group will be motivated to purchase your product or service. It should detail your marketing goals, the marketing and media mix you will use (i.e. traditional media advertising, (newspapers, television, magazines), Internet and social media marketing, direct mail, etc.), the cost, and the anticipated impacts. How will you measure your marketing effectiveness? Sales, profits, impressions?
How much revenue do you expect your business to generate? And what is the basis for your number? You need to support your financial predictions with sound data and evidence. Lenders look more favorably on projections based on historical actual numbers, but with a start-up, that isn’t typically doable. What is the financial feasibility of your business? The bottom line matters. What financial goals have been established and what evidence do you have that these goals can be achieved? Do you have a pipeline of potential customers who would provide testimonials of their intent to support your business? Even if you’re not looking to others to provide financial support to help you get your business off the ground, realistic but defensible projections are best in the long run.
Your business plan should serve as a blueprint or a roadmap for your business, detailing what the business concept is, what is expected for the business in terms of goals and objectives, and – most importantly – how (specifically!) you will achieve those goals and objectives.
So now what? I may be biased, but a great option is to work with your SBDC consultant who can support and guide you through the process, which can be daunting. Not to worry -- your consultant will help you plan and prioritize the key components of the plan, and will also provide a sounding board for the document – all of which will improve your odds of securing the funding you likely need.
A great template to follow is Duquesne SBDC’s Guide to Writing a Business Plan, which creates a logical format for you; plus, small business bankers are familiar with our format, which creates a level of advantage for you.
A complex business plan can take several months to complete and requires a commitment from the author and an aspiring entrepreneur. Partnering with your local SBDC is an indication that you are seeking professional quality deliverable and no-cost consulting help – all of which will improve the odds that your resulting business will succeed in helping realize your dream.
The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area. Click here to request free consulting, or contact the SBDC for additional help and information.
Paul Bucciarelli is a part-time business consultant with the Duquesne University SBDC and serves in the New Castle/Lawrence County Area. He recently retired from the PNC Financial Services Group after 19 years as a VP - Supply Chain Manager. Paul holds a Master's in Business Administration from Youngstown State University and a Bachelor's degree in Advertising and Journalism from Penn State. He is a part-time faculty member for the Penn State Shenango Campus, and he also serves on the Advisory Board for PSU - Shenango.