Why Is A Business Plan Such A Big Deal?

Richard Branson never wrote business plans when he started off with his magazines. So why should you? The point is not how Richard Branson came up in his businesses, the point is that, times have changed by now and without a proper business plan in hand, you’ll be lost!


Okay so what is this business plan about? A business plan is not rocket science – it really is easy to understand. You will simply state down your business plans for the future – that is it!


Business plans will help you in many ways from attracting investors to keeping you motivated. They also come in handy when selecting employees and also, in attracting them. Additionally, business plans will act as a guideline for you to follow through while expanding your business and in making vital decisions.


A good business plan will primarily consist of three parts:


01. The business concept and the structure where your business vision is stated


02. Marketplace study where potential customer base is recognized and patterns are studied. This is a key component in which you recognize the competition involved and formulate strategies to counterfeit them.


03. Financial analysis is where you project the income; show the cash flow, present the balance sheets etc. 
Additionally, your business plan would include future goals such as development strategies, a forecast for the coming year and a plan to operate and manage the business. 


It’s not really important how long or short you make your business plan. However, typically a standard business plan consists of 15-20 pages. Note that the size of the business plan will vary depending on the nature and the complexity of the business.


Who need business plans the most?


Well, every one of us that is going to starting our own business or hoping to partnering with another business needs a plan in hand before the march begins. Business plans are specifically essential for startup companies as it will act as a layer of foundation under your feet. Established companies that are looking for help will also benefit by formulating a business plan to attract investors and employees.


Something that should be used hand in hand with a business plan is a business checklist. This list is a to-do list that will detail things to be done about your business. At some point in time, while you review the business checklist, you may realize that things stated in your business plan have circumstantially changed. If that is the case, try revamping the business plan.


Depending on your work model and also the personality type, one business plan type will work best for you than others. The mini-plans are very short, abbreviated versions of a typical business plan. The working plan will help you with day to day operations of the business. The language of a working plan can get as informal as you wish. A presentation plan is for external use. It can attract investors and other supporting entities for your business. And finally, there are electronic plans stored in computers that are easier to use due to their mobility and time efficiency.

Let's Learn the Basics of Business Structures

Take your shoe size for example. Only one size would fit you properly, right? Business structures are the same. Depending on your operational model, the business structure that best suits you would be unique.

Many entrepreneurs ask a single question over and over again in an attempt to figure out the best answer: 

“What is the best business structure for my business?” – For some the answer comes after long years of experience and exposure and for most others, the answer could be derived by answering two simple questions.

So ask yourself

1)      What is the best way to protect yourself (both the business and personal assets) from general business liabilities?

2)      What entity and model will provide you the best tax benefits?

Before answering the above questions, let’s look at the types of entities and their functions:

Sole Proprietorship – this is the easiest way to start a business as initial requirements and costs of the model remain to a minimal. Every State has a different set of formalities depending on their law. However, you are most likely to need a business license, a registration number or a franchise, and an occupancy permit for the intended location of your business, despite your State of business interest. All these procedures and autonomous in nature which means you don’t have to spend money on attorneys. After all, sole proprietorship is all about being your own boss – the only owner there is to the business!

General Partnership – Starting up a general partnership too is quite easy however you will be expected to formalize (in writing) the roles and responsibilities of the partners, the portion of the capital each partner is expected to pool in, authorization and cash withdrawal policies, policies on sharing profit and losses, the procedure to follow during disputes and conditions and terms of dissolving the partnership.

Limited Partnership – This is the most recommended formality to businesses as it is protected by law. In limited partnerships, the partner’s liability is restricted to the amount he/she contributes as the investment. Therefore, it allows partners to enjoy profits from the company without being susceptible for plights of the business downturns.

Corporations – This involves complex legal procedures in which an incorporator would get involved in forming a corporation by filing an application of charter to the State in which the business would be registered. This document will detail the personal details (name, addresses) of all incorporators, the purpose of the incorporation, types of capital stock and their respective figures plus the privileges/rights of each class of stock.

Limited Liability Company (LLC) – The nature of limited liability has put this entity in the forefront among business owners while offering a one-time tax on the owners as opposed to recurring corporate taxes. The advantages of LLC’s may different from State to State so it is best to discuss the implications (both positive and negative) and the eligibility of your business with a lawyer.

Now that you know about each entity, ask yourself those two questions we posed at the beginning to figure out which type suits you best!