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by Pablo Arroyo | November 26, 2024

As discussed in previous articles, once we have identified the potential of our business idea, validated our assumptions and obtained relevant market research data, we might wonder what comes next. Many of us have probably heard about a business plan before, however, many entrepreneurs who are still in the research and planning phase, might not be sure if developing a business plan is the right course of action. They might wonder when the right time would be to get started and the reasoning behind it. The following questions might arise:

• Why should a business plan be developed?
• What is its usefulness and significance?
• What would be the critical elements for a successful business plan?
• Are there tools that facilitate the creation of a business plan?

What is a Business Plan

A business plan is commonly required when applying for a loan or presenting your business to investors or potential clients, however, the significance of a business plan goes beyond that. A business plan is a management tool that allows to monitor the performance of your business and take corrective actions. Therefore, a business plan will be useful throughout the lifetime of your business. It is a “live” document that is constantly updated as conditions are changing in the marketplace and the business is adapting. 

A business plan is the logical course of action after you formulated a business idea, defined the concept of your business and started the research and planning phase. Those initial steps established the foundation for the development of a business plan and demonstrated the commitment of the entrepreneur towards the enterprise. Without knowing it, we might have already started an informal business plan in our minds, however, by formally starting the process of creating one, we are able to bring structure and organization to our activities, with a diligent planning effort, documenting every step we complete in this process. Starting or managing a business involves a myriad of activities and a business plan allows to make sure we are addressing all of them.

We might be discouraged from starting a business plan as it might seem like a daunting task, however, we just need to focus on the different components of a business plan and follow a logical progression.

Business Plan Elements

There are several critical elements of a business plan, and the first one should be defining the mission and the vision of the business. The following questions can help us define our mission and vision statements:

• What is the purpose of my business?
• What is the need that we are solving?
• We need to define a gap in the market for which we are providing a solution and the people we are going to be serving, therefore, what makes our business unique?

After we define the mission of the business and establish the need in the market for which we are providing a solution, then we can start completing other sections of the business plan, such as:

Market Analysis: The market analysis validates the potential of our business and the expected demand for our product/service.

Company Description: In the company description, we define the operations of the company and how the staff will be covering the different functional areas. 

Marketing Strategy: The marketing strategy defines the different tactics to be employed to build a client base and generate sales. 

Product/Service Definition: The product/service definition stresses the benefits you provide and the differentiation strategy. We should be open to modifying the original concept we had for the product or service as we interact with more potential customers. 

Financial Section: the financial section defines the funding needs and how the funds will be spent.  This part includes a financial forecast for the first three years of operation of the business.    

When is a Business Plan Needed?

Everything we described above might seem overwhelming and some entrepreneurs might wonder if this lengthy document makes sense. The reality is that as I described before, the business plan is an internal tool to manage your business, and it might be required when formally applying for a loan. In the case of an existing business that already has a trajectory of several years of operation, the business plan would be a simpler document since the past financial performance has a greater relevance.

With that being said, there are other types of occasions in which presenting a full business plan is not the most adequate. Let’s say we are we are given the opportunity to present to a group of potential investors, maybe we have a potential client that gave us 15 minutes of their time, or we want to conduct a test to obtain customer feedback and gauge the receptivity for our proposed product/service. In these instances, it would be more appropriate to develop a pitch type presentation or a lean canvas. Regardless, it is always a good idea to have a working business plan in case any opportunity presents itself.

Pablo Arroyo, MBA, CGBP, CME

Arroyo, Consultants, International Consultants 2, International Trade, Tampa

NASBITE Certified Global Business Professional (CGBP), Florida SBDC at USF, Tampa

Specialties: International Trade, Strategic Marketing, Startup

Pablo Arroyo has nearly 20 years of experience in business development as an owner and business consultant in the public and private sectors. He is a NASBITE International Certified Global Business Professional (CGBP) and a Certified Marketing Executive (CME). He holds a bachelor’s degree in animal science, concentrating on international agriculture and agriculture economics, from the University of Missouri, and an MBA from the University of South Florida in marketing and international business.

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