If your side hustle has been taking off, chances are you’re considering making it a full-time business. But, have you prepared — or even thought of preparing — a business plan for it? You may not believe your gig needs one, but a business plan provides a strong foundation for the future of your company.
Budding entrepreneurs can approach drafting a business plan in one of two ways. They can write up a traditional business plan, which tends to be extremely detailed, written three to five years out in the future, and may be as long as 30 to 40 pages. Or, they can choose a lean startup plan, which is a much more condensed version of its traditional counterpart.
Traditional business plans, as I mentioned earlier, tend to be much more thorough than lean plans. They’ll cover the executive summary, business description, concept and strategy, and they’ll include industry and market analysis, the organization of the business, financial projections and any funding requests.
If that’s too in-depth for your emerging business, go lean instead. Lean startup plans do come with nine sections to cover, but don’t worry — they’re much less intensive to write up.
1. Value proposition
What original qualities or problem-solving abilities can your offerings or services bring to the market? This proposition clearly sums up the value of your business.
2. Key partnerships
You should be able to cover information about partners working alongside your business. Some of these may be outside businesses, or they may be vendors or suppliers.
3. Key activities
How will your small business gain a competitive advantage over other businesses? This section reveals your strategies and activities you’ll undertake to get the upper hand.
4. Key resources
Intellectual property or capital may be considered key resources to use that will allow you to create value for your desired consumer.
5. Customer segments
In a traditional business plan, this section is referred to as a market analysis. It defines your target market and their needs. The same goes for a lean startup plan, where you will need to be able to clearly identify the consumers that make up the target market for your business.
Now that you know who is in your target market, how will you talk to them? This section outlines the channels you will use — like email and social media platforms — in order to have, and continue, the conversation with your customers.
7. Customer relationships
How will you talk to your customers? Whether you decide to do it in person or entirely online, take the time to detail the kind of experience your business will be able to provide its customers.
8. Cost structure
Here, you’ll be able to determine whether your business is focused on reducing its costs or maximizing value, and then list the most significant costs you face for reaching that strategy.
9. Revenue streams
You didn’t think you’d get out of this document without discussing money, did you? You don’t have to get as detailed as the financial projections in a traditional business plan would, but you should have a strong idea of every revenue stream, such as ad space and membership fees, connected to your business.
One of the greatest advantages that drafting a lean plan presents to entrepreneurs is the ability to really utilize visuals. Traditional business plans tend to save tables and charts for their financial projections section, usually to illustrate the company’s cash flow and profits and losses. Most lean startup plans use charts that go beyond discussing finances. They’ll also reference the customers, infrastructure and value proposition that your small business has.
According to the U.S. Small Business Administration (SBA), business plans written in a lean startup format are in high demand for entrepreneurs who want to start their businesses as soon as possible. If your business idea is pretty simple, can be easily explained, and may require some edits and tweaks along the way, it’s in your best interest to go for a lean plan.
Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter at @mycorporation.