What Is a Business Plan?3:42 with Pasan Premaratne
There are many types of business plans out there with many different purposes. In this video, we're going to cover some of the basic purposes of a business plan and why we even need one in the first place.
[How to Write a Business Plan with Pasan Premaratne: Business Model Basics] 0:01 What is a business plan? The traditional advice when looking to start a business is that you should start with a business plan. 0:04 This is both good and bad advice. At the early stages of starting a business or venture of your own, 0:11 much of your time should be spent doing things and not planning for every outcome. 0:18 It's impossible to know what challenges you will face and whether your plan will work without going out and doing things. 0:22 But there's some merit to understanding the big picture before you set up on your task. 0:30 Let's start by defining a business plan. 0:35 A business plan is a document that lays out the plan for your company for the next 3 to 5 years. 0:38 It mainly focuses on the route the company intends to take to grow its revenue. 0:44 Business plans can have various uses. Let's go over some of them. 0:50 Traditionally, the basic use for a business plan is to plan out the business you want to create. 0:54 This may seem like a great idea but you don't want to be too rigid and stick to a plan. 1:00 You need to be able to adapt. Business plans are also used when you need funding. 1:05 The business plan outlines what your company does and how it plans to make money. 1:11 This helps investors or creditors engage whether your company is worth lending to. 1:16 Business plans can be used to communicate your ventures to people that you want to bring in to the company 1:21 whether it's a co-founder or some of your early hires. 1:27 Finally, you can create a business plan to avoid making mistakes. 1:30 By forcing yourself to think about all areas of the business, you won't leave any stone unturned. 1:35 When first starting out, creating a business plan to thoroughly explore the industry and your idea is a great idea. 1:42 The problem with traditional business plans is that it asks for a lot of forward looking information that we don't currently have. 1:49 Let's look at this small business administration website. 1:56 They have an outline for creating a business plan that we're going to analyze. 1:59 The outline on their site is a very common rubric on creating business plans. 2:03 Here's what it roughly contains--You start off with an executive summary, follow that up with a company description, 2:08 then, you have a market analysis then you have an organization and management structure. 2:15 We talked about your service or product line, then you're going into marketing and sales, follow that up with request, 2:21 financial projections, and any other documents that you have. 2:28 Looking at this, my first thought is wow that's a lot of information. 2:30 Some of that is important to know before you're going to starting a business. 2:35 Things like the market analysis. 2:39 It's important to understand the size of your target market, research your competitive landscape, and industry regulation. 2:41 It's also important to have a basic idea of how you're going to reach this target market with a marketing plan 2:48 and how you're going to execute on it with a sale strategy. 2:54 But a lot of the things on that list aren't relevant. Things like organization and management. 2:57 When starting a company, don't worry about roles and hierarchy. Let that evolve naturally. 3:02 It's also a waste of time to put together financial projections. 3:08 Advance you're guessing since you haven't done any of this before. 3:12 You'll set targets that you won't be able to hit and then you will evaluate yourself against targets 3:16 that didn't really have any solid basis to begin with. 3:22 Instead of going the old school route and writing 20 page plans, what we're going to do is undertake a simple exercise 3:25 that will help us arrive at the necessary information. 3:32 We can then use that information to create different types of business plans that are tailored to the specific business needs. 3:35
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