How to create a business plan

Keeping your business plan in your head – not documenting it – is no use to anyone but you! Unless you plan on collaborating with bunch of mind-readers, sit down and put it into words.

Most small businesses fail within the first three years. In fact, more than half close up shop within the first 12 months. It's anyone's guess as to why so many fail, but the ones that do succeed will have a properly fleshed-out plan.

A business plan is no more than an in-depth look into your idea. It's divided into four main areas: the business, the market, the future and the finances. In order to answer the tough questions under each of those categories, you'll have do some research and sharpen your thinking. The pay-off is that, when you finally decide to take the leap, there are less likely to be nasty surprises in store.

Honestly though, when you're excited about an idea and it's a perfectly formed vision in your head, it's easy to be fooled into thinking that a business plan is a waste of time. That was my reaction when I wanted to start my first business. However, my cool-headed and very patient husband insisted, that before we jumped off the 9 to 5 bandwagon, we sit together and get the plan out of my head and onto paper. I am thankful every day that we – well I – agreed to create that plan.

Try a Template

Sometimes deciding where to begin is the hardest part.  A quick Google search shows there's no shortage of guides and templates available to assist. Who to trust though? Luckily, the Australian Tax Office has put together this free template and plan guide. I highly recommend using these as a starting point.

The guide and template cover everything you need to consider when starting your business. If you are reading from outside of Australia, keep in mind that tax and registration obligations covered only apply to Australian businesses and will differ in your country.

Creating a business plan should be fun. It doesn't need to be an overwhelming task. We'll walk you through the four main areas:

The business

This is where you enter the “nuts and bolts” of your business plan. They consist of the business name, the business structure, the location, the owners and what the business is selling.

Your choices of business structure are sole trader, a partnership or you may want to register as a Pty Limited Company.  This is an important decision, so if you need advice about which is the best business structure for you, use this “help me decide tool” or consult a professional.

The market

Who are you selling to? Who is the target market and why would they buy what you're selling? How do you plan to enter the market and attract the customers you're targeting? You need to be able to answer all these questions when determining your market sector.

Remember, you don't have to be doing something 100% unique but your enterprise should have something unique about it or a point of difference that will attract a share of the market. Start by looking at the big picture here, then don't be afraid to research and go into lots of detail. A marketing plan can also help focus your ideas.

The future

What does the future of the business look like? If you had a crystal ball, where is the business going to be in one year, five years, ten years? Set both short and long-term objectives and goals for the business.

Now is a good time to think about your vision statement and your mission statement. Both are vital when determining the future of the business.

The finances

It's about now most future business owners draw the planning to a close and get started – because they find finances are way too hard. Yet, this is the single most important part of the plan. Without adequate start-up capital and cash flow, your business might be doomed to fail.

So, how much money do you need up front? Think about how the business will be set up and list everything that's required to open the doors. Do you need bond money for a lease or an expensive fit-out? Capital expenditure for computer and office equipment, stock, software, website development? If you are hiring staff, how much will be required to pay them and yourself until the customers start arriving?

This is a good time to decide if you are going to bootstrap the business, take out a loan, bring in an investor. Have you decided how you'll keep tabs on your day–to–day finance? If not, now is the perfect time. Research all of the options. 

The best piece of advice you will receive today!

If you've read all of the resource material but this still sounds like double Dutch, drop everything and bring in the pros! Speak to your accountant, lawyer, or business mentor. , If your BFF has a successful business, then pick up the phone and get a second opinion. Let them read your plan when it's done and make suggestions.

A good business plan is a tool. It's something that can be referred to constantly – and tweaked – throughout the life of your business. You'll enjoy updating it as the business develops, and with it, your business acumen, too. It will remind you of your dreams and help you to realise how far you come.