A Simpler Plan for Startups 67

Business advisors, experienced entrepreneurs, bankers, and investors generally agree that you should develop a business plan before you start a business. A plan can help you move forward, make decisions, and make your business successful. However, not all business plans are the same, not every business needs the same level of detail. You might develop a fairly simple plan first as you start a small business, and that might be enough for you. You can also start simple and then elaborate as you prepare to approach bankers or investors. Need help writing your business plan? Read my article on how to write a business plan.

For a simple example, imagine a woman making jewelry at home and selling it at a local flea market on the weekend. A business plan could give her a chance to step back from the normal flow and look at ways to develop and improve the business. The planning process should help her understand her business. It should help her define what she wants from the business, understand what her customers want, and decide how to optimize her business on her own terms. She might benefit from developing a simple sales and expense forecast, maybe even a profit and loss, so she can plan how to use and develop her resources. She might not need to create detailed cash flow, balance sheet, and business ratios. A simple plan may be just what she needs to get going.

This first stage of a plan, that we call the Concept Kick-Start, focuses only on a few starter elements. The Mission Statement, Keys to Success, Market Analysis, and Break-Even Analysis give you a critical head start toward understanding your business.

However, not all startups are that simple. Many of them need product development, packaging, retail fittings and signage, office equipment, websites, and sometimes months or even years of payroll before the sales start. Unless you’re wealthy enough to finance these expenditures on your own, then you’ll need to deal with bank loans or investors or both; and for that you’ll need a more extensive business plan. Startup company or not, the plan has to meet expectations.

A few key text topics might be enough to discuss the plan with potential partners and team members.

One suggestion for getting started is to develop your plan in stages that meet your real business needs. A few key text topics might be enough to discuss the plan with potential partners and team members, as a first phase. You may well want to add a basic sales and expense forecast, leading to profit and loss, as next phase. Adding business numbers helps you predict business flow and match spending to income.

Ultimately, the choice of plan isn’t based as much on the stage of business as it is on the type of business, financing requirements, and business objective. Here are some important indicators of the level of plan you’ll need, even as a startup:

  • Some of the simpler businesses keep a plan in the head of the owner, but every business has a plan. Even a one-person business can benefit from creating a plan document with ideas written down, because the process of producing a plan is useful and valuable.
  • As soon as a second person is involved, the need for planning multiplies. The plan is critical for communicating values, goals, strategies, and detailed implementation.
  • As soon as anybody outside the company is involved, then you have to provide more information. When a plan is for internal use only, you may not need to describe company history and product features, for example. Stick to the topics that add value, that make you think, that help support decisions. When you involve people outside the company, then you need to provide more background information as part of the plan.
  • For discussion purposes, text is enough to get a plan started. Try describing your mission, objective, keys to success, target market, competitive advantage, and basic strategies. How well does this cover your business idea?
  • Can you live without a sales and expense forecast? Sometimes the one-person business keeps numbers in its (the owner’s) head. However, it’s much easier to use some tools that can put the numbers in front of you, and add and subtract them automatically. That’s where a plan helps.
  • Do you really know your market? A good market analysis can help you see opportunities that might not otherwise be obvious. Understand why people buy from you. What are the needs being served? How many people are out there, as potential customers?
  • Do you manage significant amounts of inventory? That makes your cash management more complicated, and usually requires a more sophisticated plan. You need to buy inventory before you sell it.
  • Do you sell on credit? If you are a business selling to businesses, then you probably do have to sell on credit, and that normally means you have to manage money owed to you by your customers, called accounts receivable. Making the sale is no longer the same thing as getting the money. That usually requires a more sophisticated plan.
  • Do you do your taxes on a cash basis, or accrual basis? If you don’t know, and you are a very small (one person, maybe 2-3 people) business, then you’re likely to be on a cash basis. That makes your planning easier. However, most businesses big enough to work with a CPA and have separate tax statements use accrual accounting because they want to deduct expenses as they are incurred, even if they aren’t fully paid for. By the time you are using accrual accounting, you’ll probably need more sophisticated cash flow tools, and a more extensive business plan.
  • As you approach banks and other lending institutions, expect to provide more detail on personal net worth, collateral, and your business’ financial position. Some banks will accept a very superficial business plan as long as the collateral looks good. Others will demand to see detailed monthly projections. No bank can lend money on a business plan alone; that would be against banking law. But a good bank wants to see a good plan.
  • If you’re looking for venture investment, take a good look at your plan. Professional investors will expect your plan to provide proof, not just promises. They’ll want to see market data, competitive advantage, and management track records. They’ll want to see robust and comprehensive financial projections. True, you’ll hear stories about investors backing new companies without a plan, but those are the exceptions, not the rule.

So, however you cut it, your business plan is very important, even at the early startup stage, and even if you can keep it in your head. Before you purchase business stationery, telephones, or rent a location, you should do a business plan.

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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  • http://idlehandsbreedkaos.blogspot.com Aneesa

    I’m working on a start-up business plan for a hockey apparel storefront. I found your tips useful as they were easy to understand. In reviewing the intermediate plan, what are outlines 4.0, 4.4., and 7.1? They were not labeled.

  • eric

    excellent and good work done

  • Maria Morales

    Thank you so much for this simple to understand explanantion of what to consider while venturing into my business plan. I “the” woman that actually makes jewelry at home and have begun to have distributors sell my jewelry for me. I plan on working from the convenience of my home and plan for independent contractors to work from their home when making and selling jewelry.
    Q: Which will be best for me, an L.L.C. or Corporate business?
    I am leaning more towards the LLC because from what I understand thus far, it has more benefits for me when it comes to saving money.
    Open opinion is welcomed.

    Thank you kindly,
    Single Mother in Antioch,CA
    ~Maria~

  • Jacob Dinda

    your plans are good for all the obvious reasons- simple to understand , easy to implement and rewarding.

    Jacob Dinda
    Nairobi,Kenya

  • JACOB MUINDI

    Thankyou for your inspirering work of which it has helped me to understand better how business plan is all about. Thanks and be blessed in your work and the spirit you hahe.

  • Anthony

    Hi

    I am starting a new website company and i have some ideas which i feel i must put it down into a proper business plan. My question is once i have done. Do I need to do a Copywrite on this business plan? For safety.

    Regards
    Anthony

    Hi Anthony,

    I’m going to suggest heading over and checking this article out: http://articles.bplans.com/incorporating-a-business/getting-investors-and-protecting-your-idea

    I think it might be helpful for you.

    ‘Chelle Parmele
    Bplans.com

  • liza monageng

    I knew completely nothing about how to go about conducting a business plan, but after reading this… I must say, I felt like changing my Psychology degree to a more business related degree!

  • bernard

    i need to start a business in supply of steel for construction.i live in kenya in a neighbourhood that is just comming up with new construction.the market is currently held by small time players.i don’t have the capital requisite for a major start up.i want a bank loan and therefore a business plan to convince the bank to lend me start up capital.the only collateral i have is document of ownership of the property i live in.the plan i need is for both with and without the collateral.how do i do it?

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  • http://yahoo Martha Osabutey

    I have a lot of businesses in mind and have now settled on one but how do i start without any capital and also with the help of the business plan.
    Thank you

    Martha

    Ghana.

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  • http://www.ChefDavidHill.com David Hill

    Hi I am starting a Private Chef business and I would love to hear from anyone that can help me out. I am not sure what way to go if I start out with a LLC or S corporation. Also need a little help with Forming a Bussiness plan, still working on it not quite completed.

    Thanks, David Hill

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  • http://thekraftykate.vpweb.com/ Katherine C.

    I am just starting a new home-business, and I, too, am the “woman making jewelry at home”! I was looking up biz-plans online and yours so far has the best & easiest to understand information for a novice like me. THANKS!

  • benedict muasya

    i am interested in starting up a hatchery business in kenya and am looking for any sample business plans. thanks

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    i am looking for help with devising a business plan to present to potential lenders or investers for a hairdressing & beauty business. i already manage someone’s business and would like to start my own.

  • Richard McHam

    I am trying to start a new restaurant in my area. I have been working on a business plan for a month now, and I have hit a roadblock. I found it fairly easy to write my mission statement, goals, target market, and overall concept. What I am finding difficult is the numbers aspect of the plan. What are the most important aspects of the financial side of the plan that I should concentrate on. I want to put together a very basic plan to take to investors, real estate agents, and creditors, and then once I have the basic plan, I want to expand and make it more detailed and informative

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    I intend to start a detox house. I have a skeleton idea of the requirements but i really need help doing a bussiness plan. I know this may be very involving because it engages outsiders, and probably banks and lenders and thats why i want to put most if not all things together to start.

  • Connie

    I have recently started a very small business. Do I really need a long formal plan in order to be taken seriously? The focus of the business is simplicity.

  • Shellu

    I’ve been in business for a little over seven years now but was only able to understand the essence of doing business with the guidance of a well structured business plan. As a student of Business, reading Accounting, I was given an assignment to do a BP for my entity, this was when this sample plan broading my scope and understanding of a BP. I want to say thanks a million for such a wonderful work that will serve as a guide for all successful enterpreneures.

  • Mpho

    It is really inspiring to know that i’m a not alone.first like to thank all for the good imputs on this topic,and lastly the good work on this business sample,keep up.i knw it’s easier to have it all booming and florishing in my fantasy,but becomes a nightmare to imagine implementing all my ideas starting from zero.my employment life isn’t good and staying in the busiest city of pretoria(SA) Where everyone resides.So i think of unleashing my full potential in starting a motor mechanical workshop near villages,which will also serve as development centre for potential bright youths that interested in becomming the future experts to repairing morden motor vehicles.i’m 26 yrs old,qualified motor mechanic and few years experience, with this and more ideas roaming in my head! From my brief,i was wondering if someone can tell me if this a dream likely to come true or your dream!you will die with it? ANY TIPS AND ADVISES WILL BE APPRECIATED.

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    How do you go about getting a market analysis? We are trying to open a mechanic shop. I have 3 certified mechanics each with a different specialty, but the word market analysis confuses me

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    After reading this, I’ve decide to go with a simpler plan to for now, and build it as the business grows. Thanks for the info!

  • Baquita Reezer

    This sample business plan has given me more insight
    Thank you!

  • Bradley

    Nice pointers! I will be opening a small twisty puzzle store (rubik’s cubes etc.) and I’ve been business planning for almost 2 months now. (I’m still working on my financial plan, which is a pain). But, I see things much more clearly now. Planning can be fun, and it can make you pull your hair out.

  • Raphael

    Hi. I find your explanations very interesting and I would like to say thank you for all you’ve done.
    However I want to know which financial figures do I have to pick to make financial forecast. Do I invent them or do I pick financial figures from a competitor?

    • http://www.businessingeneral.com Chelle Parmele

      Hi Raphael,

      That’s a great question. To start with, take a look at this article on forecasting. And this article by Tim Berry “No, you can’t just pull numbers out of the air

      I hope that helps you out!
      ‘Chelle Parmele
      Palo Alto Software

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    I like the art of work. this made me understand the complex issues arround business plans. I acknowledge the work!!!

  • Jacoby Lawrence

    Just wanted to say thank you for the article. It’s been quite a lot of work. I’ve started over several times trying to wrap my head around the financials and research. But, Business Plan Pro gave me all the tools I needed to formulate an effective plan. The only problem was the research. If you have the resources, companies like bankreadyplans can be of great help in getting you over the last hurdle. It was worth it for me to polish my business plan.

    Thanks again!

    - Jacoby

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    I think it very important for someone who start his/her business.

  • Wananda Nasur

    Thank you very much for this information. Its so helpful to me since I am planning to start up a small business in my country Uganda. The plans are easy to internalise.

  • Ngunan

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  • Paul

    I am currently working on a business plan which I plan to bring to Wharton’s Small Business Development Center for advice. Will also be registering for a seminar at the SBDC in February. I have no previous experience in consulting however, my plan is to start a consulting company specializing in high end luxury residentian and residential/commercial construction, Ghetto rehabs, and real estate investing. Currently looking for someone in the consulting industry to help guide me through the process. I’m very determined and willing to do what it takes to succeed. Any help would be appreciated.

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    Very simple, nice and encouraging topic.Thanks.

  • Gladys Mumba Kamanga

    I am getting ready to retire I am a Nurse and planning to open a Nursing School. I need partners and assistance on how to write a business plan.

    ———-
    Hi Gladys,

    We can’t help you with finding partners, that is probably something you’ll need to research and search for on your own, but as far as business planning, we’re happy to direct you to the resources on this website, including our business planning software, Business Plan Pro. The software is designed to help you write a business plan from start to finish.

    You can get more information on business planning software here.

  • http://iplanner.net Taat

    The simplest outline for a business plan could be following:
    1. Who – who is running the show
    2. What – products or services
    3. Why – customers, market segments, value proposition
    4. When – road map, projections, goals

  • Intrigued Beginner

    After years of school I realized I have done one business plan after an associates and bachelors. Sad I know and now I’m looking to create one. This has been an awesome beginning. Thanks so much :)

  • Bildad Seyoum

    Thank you, the information helps me to understood how a business plan is prepare. Now am ready to prepare the business paln for my assignment, Finally thank you again.

  • Mukuahima Tjitependa

    Thanks so much for the information, it helps me so much on how to prepare and structure a business plan. i will start my business plan as soon as possible. thanks so much once again.

  • http://google Herman Blackmon

    I would really appreciate any information I can get about starting my own business, which is really unique in many ways. I am a glass artist which I paint on glass with an uncanny perspective point of view.

    • caesar

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  • Enkay

    Hmmm!!! am loving this information I’ve received thus far. Thank you for your simplicity in breaking it down to a lay man’s understanding. Bravo!

  • Richard Ayiiba Alexander

    Dear sir,
    I would like start up a new business dealing with computer repairs and selling of computer parts. would please give me a sample of a business plan or a business letter in any form of a business which will guide me to write mine.
    thank you i hope you will help me through me email.

  • Meshack Chewez, Tanzania

    Thanks you a lot for the information, actually it real help as it is brief and precise. I just got something to start with, be blessed!

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  • Wahabi

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  • Fungai

    I am planning on starting a clothing boutique for office wear and i need help on writing up the bussiness plan. Any comments and suggestions are welcome.

  • david kish

    wow! i realy admire this. keep up. thank

    KENYA

  • yoli

    thank u so much with all the information about how to start a small business plan

  • Jan Noval

    thanks for the information, i kinda understand what i should do but i’m just having a hard time on how will i conduct my study for the business plan that i’m putting up. i wanted to put up a small business like a spaghetti house, my target market would be all levels of the society.

  • Cornelius kayode

    Thanks for this information, but how can go with the writting of busines plan on photography pls i need more exeplanation on it explanati

  • Asante Kwaku Antwi

    am trying to start a new graphic design company in my area. I have been working on a business plan for a month now, and I have hit a roadblock. I found it difficult to write my mission statement, goals, target market, and overall concept. What I am finding difficult is the numbers aspect of the plan. What are the most important aspects of the financial side of the plan that I should concentrate on. I want to put together a very basic plan to take to investors, real estate agents, and creditors, and then once I have the basic plan, I want to expand and make it more detailed and informative

  • http://google MARYAM CHINJA

    thank you mr.

  • frank japhet kimbesa

    thanks for your help ;i;m going to work on it soon.

  • Abdulrazaq

    Thank you so much, your ideas makes me pass my exams

    • Dappled_star

      you are always welcome

  • http://royaltyfashionandstyle.com Joyce

    This is the kind of topic I am searching because next month, I will start making a business plan for my subject, Global Marketing. Thank you for sharing this very helpful tips and information.

  • mheg29

    what is market segmentation?

    • Starclassic123

      market segmentation means divide the customers of the market on the basis of the financial capacity, age, sex, interest, etc.,
      and target market segmentation means select the group of customers from this your product or services is to be distribute.

  • Gianne

    Thanks…Helps alot:D

  • David acquah

    this is a good idea which is helping us a lot expercially those of us who want to became entreprenuers in the near future.

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  • robert gitonga

    i am currently in employment with a relative good pay however i have always had this inner deep feeling/calling to take the risk and venture to being an entrepreneur.given that i can manage my own resources,manage my time.would you give it a thought

  • Diane_chinitah03

    guzto q mkapag tayo ng business mlapit nah

  • Masihullah

    Thanks for your allowable/acceptable idea/advice Mr Tim Berry!

  • Mugerwa E Amos

    All is now well with my business!!

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  • sibbu2005

    Thanks for this nice and valuable article, very helpful and appreciated.

  • http://businessplanmentor.com/ Business Plan Mentor

    Thank you Mr. Berry. Excellent article with important detail. However, it is still a bit much for someone looking for simple step by step instructions on how to write a business plan. For a free tutorial please view my profile and head for the website.

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    Hi,i want to start my own business of bricks in a rural area,but ive got little funds,and i dont know how to write a business plan,i need your to help me.