What You Need to Know Before You Create a Legal Business Plan
Brad Smith • October 25, 2019
Fantastic! You’ve got an idea for a new business that you think will really take off. This kind of entrepreneurial spirit is what helps the American dream work.
The harsh reality, though, is that most businesses don’t make it. Approximately 20 percent of businesses survive
their first year. Half of them are gone after five years, and only one-third see their 10-year anniversary.
Starting a new business is tough.
While prosperity isn’t guaranteed, creating a legal business plan can help you decide whether your business will be successful.
A business plan is the foundation of your business. It helps you know whether your business is viable, or whether you’ll wind up like 80 percent of other businesses.
It’s important to have a business plan
so that you can help market your stellar idea when you originally may have a not-so-stellar approach. Business plans help you do the following:
- Better understand your target market’s demographics, economic tendencies, and behaviors
- Clarify your approach to producing, manufacturing, marketing, and selling your products or services
- Create benchmarks for accountability
- Sort out complexities involved in your supply chain, operations, and financials.
- Solve problems sooner.
Now that you know why a business plan is important, you must pick a format
for developing one. You have two basic choices: a traditional plan or a lean plan.
Traditional business plans offer more details and are far more comprehensive. They also take longer to write. This format includes sections on a market analysis, organization and management, financial projections, and any funding requests, if necessary.
Lean business plans provide a high-level overview and take less time to write. This plan is based largely off the Business Model Canvas format that encapsulates nine key areas, such as partnerships, resources, and customer segments.
No matter how you choose to format your business plan, you need to know about several critical areas beforehand. These include:
- Knowing what your business is. What types of products or services will you sell? How would you describe your company? Where is your company located? How many people do you plan to involve? How do you create value?
- Getting funding and creating revenue. How is your business going to be financed? How will your business make money? What’s the return on the investment for investors?
- Structuring your business. Are you a sole proprietor, or do you envision involving partners? What liabilities are you comfortable taking on, and which should fall to your business? Review our guide on how to pick a legal business structure.
- Sales and marketing - Who will buy your product or service? How will you market to them? Is your sales process long or short? What does the sales process entail?
We have only scratched the surface about what’s involved in creating a business plan.
If you or someone you know is considering starting a business, please urge them to contact us first. We’ll point them toward success when it comes to starting a business.
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