The Myth of the Business Plan. What entrepreneur hasn't been told of the need for a written business plan? But most, when asked whether they have one, would cast a guilty look at their shoes. Well, fret no more. Continuing research at Babson College, regarded as having one of the top entrepreneurship programs in the country, finds no statistical correlation between a startup firm's ultimate revenue or net income and the supposedly requisite written business plan.
"Some of the heroes of today's would-be entrepreneurs, such as Steve Jobs, Bill Gates and Michael Dell, did not have business plans in hand when they embarked on ventures that changed the world," the study noted. The research debunked the business plan more than three years ago, but the myth lingers. Don't get me wrong: I'm all for having a business plan in the verb sense.
It distracts the entrepreneur from slaying dragons and thinking big thoughts. Related: An Introduction to Business Plans Won't lenders want to see a business plan? Like this article? Three Questions to Answer Before You Write a Business Plan. I was at a small-business fair recently and had a ground-level conversation with a woman right at the very beginning of a business plan.
As we talked, I realized she was struggling with three vital questions she had to answer before she could get into the rest of the plan. I told her to think hard about the following before going further. 1. What does success look like? This is by far the most important question that almost nobody asks. I think most of us naturally assume that success in business is measured in growth and profits, or, at the very least, money in the bank.
For example, I know people who built their businesses to give them a way to be at home when the kids get out of school, or to have the freedom to coach a kids' soccer team. Related: How to Estimate Startup Costs 2. Yes, the type of business plays a role. The woman at the fair could easily decide to focus on what she can do by herself, and keep full control, even though that might mean growing more slowly. 3. Three Financial Guesstimates Every Business Plan Needs. Question: I read about financial projections and market numbers, but the specifics vary a lot. What financial projections does my business plan need to include? Answer: Obviously you should tailor your business plan to your specific needs, but given the realities of business, we almost always have to deal with certain basic financial projections.
Even if you're running a nonprofit organization, you can't escape the money, nor should you try. You have to have a plan to make sure you have cash in the bank. It's hard to imagine a business plan that doesn't need that. Almost all of finance and accounting deals with three fundamental financial statements: the income statement (also called profit and/or loss); the balance sheet; and the cash flow. But there's a critical difference between accounting and business planning. The Projected Income Statement The income statement, whether it's projected or historical, is about profits and/or losses. The income statement starts with sales. Five Steps for Getting Your Business Up and Running. Five steps for getting your business up and running successfully. If you're reading this, it means you're interested about starting a business. Now it's time to focus your entrepreneurial spirit using the following five steps. 1.
Look for that "aha" moment Sometimes the inspiration for business ventures comes from what's around you--or from what isn't. Take Entrepreneur magazine's home base of Irvine, Calif. The lack of fast-food restaurants in the business area meant treks across town for lunch, prompting two young men to ponder, "Wouldn't it be great if we could get some good food delivered? " Rather than waiting for someone else to capitalize on the idea, they purchased one of Entrepreneur's business startup guides and launched a restaurant delivery business. Netflix provides a similar example. The lesson? 2. Plenty of people argue yes. Entrepreneurship professor William B. "You're two and a half times more likely to get into business," Gartner says.
But more isn't always better. 3. 4. An Introduction to Business Plans | Business Plans. A business plan is a written description of your business's future. That's all there is to it--a document that desribes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan. Business plans can help perform a number of tasks for those who write and read them. They're used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.
So what's included in a business plan, and how do you put one together? Sound impressive? Breaking these three major sections down even further, a business plan consists of seven key components: In addition to these sections, a business plan should also have a cover, title page and table of contents. Who Needs a Business Plan? Getting To Know Business Models. When analyzing companies, investors can easily get caught up in details such as performance figures, stock ratios and valuation tools while forgetting a more basic question: how does the company actually make money? A solid business model remains the bedrock of every successful investment. To distinguish the great companies from the losers, investors should learn how to describe and evaluate companies' business models.
(Learn more about evaluating your own business model; read Is Your Business Model Viable? An 8-Point Test.) TUTORIAL: Reading Financial Tables What's a Business Model? The business model also refers to how product delivery brings in revenue. Electric shavers have a different model. As industries change, companies can't always afford to stick to the same business model. A company's business model isn't always obvious. Business models can also be downright counterintuitive. Assessing the Business ModelSo how do you know whether a business model is any good? Business Plan: Introduction.