1 00:00:01,430 --> 00:00:03,450 [How to Write a Business Plan with Pasan Premaratne: Business Model Basics] 2 00:00:04,830 --> 00:00:11,730 What is a business plan? The traditional advice when looking to start a business is that you should start with a business plan. 3 00:00:11,730 --> 00:00:18,540 This is both good and bad advice. At the early stages of starting a business or venture of your own, 4 00:00:18,540 --> 00:00:22,920 much of your time should be spent doing things and not planning for every outcome. 5 00:00:22,920 --> 00:00:30,020 It's impossible to know what challenges you will face and whether your plan will work without going out and doing things. 6 00:00:30,020 --> 00:00:35,200 But there's some merit to understanding the big picture before you set up on your task. 7 00:00:35,330 --> 00:00:37,800 Let's start by defining a business plan. 8 00:00:38,610 --> 00:00:44,820 A business plan is a document that lays out the plan for your company for the next 3 to 5 years. 9 00:00:44,900 --> 00:00:50,340 It mainly focuses on the route the company intends to take to grow its revenue. 10 00:00:50,340 --> 00:00:54,460 Business plans can have various uses. Let's go over some of them. 11 00:00:54,460 --> 00:01:00,440 Traditionally, the basic use for a business plan is to plan out the business you want to create. 12 00:01:00,440 --> 00:01:05,840 This may seem like a great idea but you don't want to be too rigid and stick to a plan. 13 00:01:05,840 --> 00:01:11,790 You need to be able to adapt. Business plans are also used when you need funding. 14 00:01:11,790 --> 00:01:16,640 The business plan outlines what your company does and how it plans to make money. 15 00:01:16,640 --> 00:01:21,860 This helps investors or creditors engage whether your company is worth lending to. 16 00:01:21,860 --> 00:01:27,380 Business plans can be used to communicate your ventures to people that you want to bring in to the company 17 00:01:27,380 --> 00:01:30,770 whether it's a co-founder or some of your early hires. 18 00:01:30,770 --> 00:01:35,360 Finally, you can create a business plan to avoid making mistakes. 19 00:01:35,360 --> 00:01:41,030 By forcing yourself to think about all areas of the business, you won't leave any stone unturned. 20 00:01:42,130 --> 00:01:49,220 When first starting out, creating a business plan to thoroughly explore the industry and your idea is a great idea. 21 00:01:49,220 --> 00:01:56,390 The problem with traditional business plans is that it asks for a lot of forward looking information that we don't currently have. 22 00:01:56,390 --> 00:01:59,980 Let's look at this small business administration website. 23 00:01:59,980 --> 00:02:03,900 They have an outline for creating a business plan that we're going to analyze. 24 00:02:03,900 --> 00:02:08,900 The outline on their site is a very common rubric on creating business plans. 25 00:02:08,900 --> 00:02:15,290 Here's what it roughly contains--You start off with an executive summary, follow that up with a company description, 26 00:02:15,290 --> 00:02:21,660 then, you have a market analysis then you have an organization and management structure. 27 00:02:21,660 --> 00:02:28,360 We talked about your service or product line, then you're going into marketing and sales, follow that up with request, 28 00:02:28,360 --> 00:02:30,970 financial projections, and any other documents that you have. 29 00:02:30,970 --> 00:02:35,830 Looking at this, my first thought is wow that's a lot of information. 30 00:02:35,830 --> 00:02:39,160 Some of that is important to know before you're going to starting a business. 31 00:02:39,160 --> 00:02:41,380 Things like the market analysis. 32 00:02:41,380 --> 00:02:48,720 It's important to understand the size of your target market, research your competitive landscape, and industry regulation. 33 00:02:48,720 --> 00:02:54,120 It's also important to have a basic idea of how you're going to reach this target market with a marketing plan 34 00:02:54,120 --> 00:02:57,250 and how you're going to execute on it with a sale strategy. 35 00:02:57,250 --> 00:03:02,630 But a lot of the things on that list aren't relevant. Things like organization and management. 36 00:03:02,630 --> 00:03:08,400 When starting a company, don't worry about roles and hierarchy. Let that evolve naturally. 37 00:03:08,940 --> 00:03:12,590 It's also a waste of time to put together financial projections. 38 00:03:12,980 --> 00:03:16,240 Advance you're guessing since you haven't done any of this before. 39 00:03:16,470 --> 00:03:22,010 You'll set targets that you won't be able to hit and then you will evaluate yourself against targets 40 00:03:22,010 --> 00:03:25,110 that didn't really have any solid basis to begin with. 41 00:03:25,110 --> 00:03:32,580 Instead of going the old school route and writing 20 page plans, what we're going to do is undertake a simple exercise 42 00:03:32,580 --> 00:03:35,410 that will help us arrive at the necessary information. 43 00:03:35,410 --> 00:03:42,180 We can then use that information to create different types of business plans that are tailored to the specific business needs.