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[How to Write a Business Plan with Pasan Premaratne: Business Model Basics]

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What is a business plan? The traditional advice when looking to start a business is that you should start with a business plan.

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This is both good and bad advice. At the early stages of starting a business or venture of your own,

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much of your time should be spent doing things and not planning for every outcome.

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It's impossible to know what challenges you will face and whether your plan will work without going out and doing things.

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But there's some merit to understanding the big picture before you set up on your task.

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Let's start by defining a business plan.

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A business plan is a document that lays out the plan for your company for the next 3 to 5 years.

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It mainly focuses on the route the company intends to take to grow its revenue.

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Business plans can have various uses. Let's go over some of them.

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Traditionally, the basic use for a business plan is to plan out the business you want to create.

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This may seem like a great idea but you don't want to be too rigid and stick to a plan.

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You need to be able to adapt. Business plans are also used when you need funding.

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The business plan outlines what your company does and how it plans to make money.

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This helps investors or creditors engage whether your company is worth lending to.

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Business plans can be used to communicate your ventures to people that you want to bring in to the company

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whether it's a co-founder or some of your early hires.

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Finally, you can create a business plan to avoid making mistakes.

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By forcing yourself to think about all areas of the business, you won't leave any stone unturned.

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When first starting out, creating a business plan to thoroughly explore the industry and your idea is a great idea.

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The problem with traditional business plans is that it asks for a lot of forward looking information that we don't currently have.

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Let's look at this small business administration website.

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They have an outline for creating a business plan that we're going to analyze.

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The outline on their site is a very common rubric on creating business plans.

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Here's what it roughly contains--You start off with an executive summary, follow that up with a company description,

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then, you have a market analysis then you have an organization and management structure.

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We talked about your service or product line, then you're going into marketing and sales, follow that up with request,

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financial projections, and any other documents that you have.

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Looking at this, my first thought is wow that's a lot of information.

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Some of that is important to know before you're going to starting a business.

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Things like the market analysis.

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It's important to understand the size of your target market, research your competitive landscape, and industry regulation.

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It's also important to have a basic idea of how you're going to reach this target market with a marketing plan

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and how you're going to execute on it with a sale strategy.

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But a lot of the things on that list aren't relevant. Things like organization and management.

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When starting a company, don't worry about roles and hierarchy. Let that evolve naturally.

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It's also a waste of time to put together financial projections.

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Advance you're guessing since you haven't done any of this before.

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You'll set targets that you won't be able to hit and then you will evaluate yourself against targets

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that didn't really have any solid basis to begin with.

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Instead of going the old school route and writing 20 page plans, what we're going to do is undertake a simple exercise

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that will help us arrive at the necessary information.

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We can then use that information to create different types of business plans that are tailored to the specific business needs.