June 25, 2024


Obey Your Finance

Starting a Business? A Business Plan is Critical

Amir Ben-Yohanan says that it’s safe to say that no one wants to fly in a plane after the front windows have been covered with black paint, yet businesses are started daily by budding entrepreneurs that might as well be piloting that plane.

Even the greatest of ideas need a plan. It might be that the most incredible ideas need the best plan possible to become a reality and change the world. A business plan isn’t an option for a new business but a requirement.

What is a Business Plan

Your business plan is an outline against which you and others may gauge the business’s success. It represents your vision and conveys it to those that might invest in you, loan you money, advise you, or even work for you. It’s not set in stone as your business will change as better methods or markets come about, but it’s where you start until a new plan comes about.

Your business plan will typically describe the market, a problem or market segment you’ve identified that is an opportunity, and how you propose turning that opportunity into a business. It will include biographies of any key personnel, proposed funding sources, and how you intend to market the business. Finally, financial predictions, including costs and revenue, will be the main component for both you and others to use as a guide even months down the road.

There are two forms of business plans; a complete plan and a lean plan. Amir Ben-Yohanan explains that both deserve considerable time and attention to ensure they’re complete and convey the whole picture of the company.

The U.S. Small Business Administration (SBA) lists the components of a complete business plan as:

  1. Executive summary
  2. Company description
  3. Market analysis
  4. Organization and management
  5. Service and product line
  6. Marketing and sales
  7. Funding request
  8. Financial projections
  9. Appendix

The Biggest Benefit of the Plan

As you can tell, business plans can include a considerable amount of information and are neither quick nor easy to write. That’s what makes them valuable. They make you think and analyze the market, your expectations, the amount of money you need, and many other business questions. You’ll likely encounter items that end up completely rethought while going through your plan.

An entrepreneur has to be involved in creating the plan, if not writing the entire plan. People are pitching for someone to “write my business plan” on freelancer sites across the Internet and want to have it done for $250. That alone indicates that business might not have a long life ahead. 

Use Your Financial Projections

Amir Ben-Yohanan notes that the financial projections are at the end of your business plan because they are the essential part. Everything else in the plan leads to the ultimate financial viability of the company. You’ve started this to build wealth for you and your family and serve the community for decades to come.

Known as a ‘proforma,’ the financial plan integrates your startup capital, expected startup costs, sales, employee needs, fixed costs like rent, and variable costs and carries it all two to three years out. There is much guesswork in figuring out reasonable sales expectations for a company that might not yet exist, but that’s the point. You create an idea, adjust as you stumble forward, and use your projections and budget as a guide along the way.

Aligning with its importance, creating the proforma can be the hardest part of the business plan, and it can easily be said that many entrepreneurs are not financial whiz kids. Recruiting someone with an accounting or finance background to help prepare it is excellent.

For those without the budget to hire someone or who don’t have access to a finance pro, plug-and-play spreadsheets are abundant online. Please don’t pay for one when they are free through many business community websites.

Review, Review, Review

Once it’s written, it isn’t filed away. You need to return to your plan often. It is equally as important to find business mentors, have them read it, and let them tear it apart. It’s guaranteed that your plan makes incorrect assumptions, has overlooked a few things, and could be missing some market opportunities that are staring you right in the face.

It’s not just a plan; it’s a chance to learn, check your ego, and build something.

Get Some Great Free Help With It

The U.S. is built on small businesses, and many excellent free organizations exist to help those wanting to develop their own thing. The Small Business Development Center is a division of the SBA and an excellent free resource. Also, the non-profit organization SCORE is an SBA partner and has a network of retired executives that want to help you.

You don’t take off in a plane with blacked-out windows, and your business doesn’t take off without a business plan. You’ve got a great idea, and you’re ready to go. Get it on paper, learn from it, and show people your vision.

Amir Ben-Yohanan is the Founder of West of Hudson Group, Inc. and presently is the Chairman, Chief Executive & Financial Officer at Clubhouse Media Group, Inc., and Chief Executive Officer at West of Hudson Group, Inc. (a subsidiary of Clubhouse Media Group, Inc.).

Published May 6th, 2022