Every entrepreneur that wants to run a successful business starts with a plan. You may not have had a professionally written business plan, but you at least had a plan in mind for what you wanted to do with your business when you started, right?
Planning your business is a lot like planning your finances. It can be easy even if you hate finance. There are some important components to creating a business plan.
Components of a Business Plan
Executive Summary
You have to explain what your business is, what you do, and what goals you plan to accomplish; that’s your executive summary. That lays the groundwork for everything else you plan. The executive summary can be a short paragraph or a full page. Whether it is long or short, it should be succinct and not waste words.
Marketing Plan
Then you have your marketing plan. And that is what explains how you’re going to go about completing the goals in your executive summary. This is the part of the plan where you detail your customer base and how you plan to reach them.
Financial Statements
Then there are your financial statements, those are the backbone of your business. They outline how you will fund your endeavor and when you will start making money. Some say that the financial statements are the most important part of a business plan because numbers don’t lie.
Planning your personal finances is no different. The names of the components may be different but the idea is the same.
Components of a Personal Finance Plan
Life Plan
Your executive summary states what you want to accomplish in your finances. Do you want to be a millionaire? Do you want to retire by the age of 30? You first have to think about your goals and what you want your money to look like. Creating a life plan helps you to determine a focus for your goals. I was given a suggestion a year ago that has helped me tremendously this year. I was told to create a vision board with pictures and words detailing what I want my life to look like. I have already begun to accomplish many of those goals that are on my vision board. That is my executive summary in visual form.
Career/Business Plan
This is like your marketing plan. Are you going to work for someone else and save what you can? Are you going to create a business to earn income for you? With this plan you start to think about how you will accomplish the goals that are in your life plan. I personally have a goal to become a CEO of a major corporation by the time that I am 50. I am working my plan in order to get there. I either need to build my own business, or work up the ranks in someone else’s businesses. But either way, I have to plan that.
Budget
So many people hate this word. Budget sounds restrictive. It reminds people of when they were kids and they were in the grocery store with their mom. Remember that? You would say, “Mom can I have this candy bar/toy/shiny object?” And she would say “Put that back! It’s not in our budget.” I think that’s the main reason we have such a negative association with this word. A budget can be as free as you make it. YOU are in charge of what you save and spend. The main point is that you have to have a plan in order to reach your goals.
Take a look at a great Personal Capital review where you can manage your budget and cash flow for free. There are so many great free financial tools online that everybody should take advantage!
What’s your plan? Do you have a method of attack to reach your financial goals?
I’m a huge planner and list maker! We have both short and long term goals for our finances and are diligent about checking up on our progress towards those goals. Yes, budget can be a dirty word so we don’t use it in our household – I prefer to call it a “spending plan”. :)
Nice! That makes it even more exciting to stick to it
I love planning, and goal setting is my favorite too! Sometimes things don’t work out exactly to plan, but with that plan you’ll still get much closer to your end goals than if you had none!
Exactly! You have to at least begin with a few steps.
The executive summary is an important component because it should be looked back upon to make sure you are going down the right path. It’s all to easy to stray away from your objectives once things actually start happening. Make sure you stay focused by going back to your plan (particularly your executive summary) now and then.
I always hated writing the executive summary because it made me actually think about what my goals were. It’s very important in planning.
Goal setting and diligent planning is the primary reason for our financial well-being today. If we never set a goal we would have never paid off debt, we probably wouldn’t have much for savings and wouldn’t have anything towards retirement.
Like you said, you need to know what your goals are. If you don’t know where you want to go, you’ll never get there.
It’s really amazing how much difference a plan can make. Congrats on paying off the debt! I know that feels like a weight lifted.
Budget sounds like pleasant to me, but I know I’m not the norm. :) I love planning and working towards achieving my goals. Maybe that is the personal finance blogger in me. Thanks for sharing LaTisha.
It’s ok Corey, I’m not very normal either :) I actually like watching my savings grow more than I like spending.
Finally, someone who understands…
haha! Isn’t that why we’re PF bloggers? lol
I’ve done business plans a couple of times for businesses that never got off the ground, and it really isn’t all that complicated. In many cases, there is a SBA office nearby that is willing to help as well.
Good point, the Small Business Administration is great for getting started. My college also has a small business plannign center that helps local entrepreneurs. There’s plenty of help for those who seek it out.
Great post. I too am a huge planner and used to putting in the kind of effort you describe here. I am actually helping a friend right now develop her business and marketing plan. She should be ready to lanch in the spring.
Thanks Miss T! I love the start up phase and thinking through everything. I bet it’s really rewarding to be able to help your friend also.
very good post. planning (in everything i do) is my favorite part of the entire initiative. when i took the skills test, i realized that i am a visionary more than anything. strategic planning and organizing are my strong skills. totally made sense in retrospect when i evaluated past activities.
And you are very good at planning Sunil, I can tell by the effort in your online business. I’m sure there are more plans in the works that I don’t see. :)
I’m also a huge planner. I really enjoy sitting around and trying to figure out every possible situation, and also trying to figure out plans to cope for things that I cant see coming. I’m always trying to help friends with business ideas. Actually, am currently working on one, but we’ve got to make some changes in laws to start. Long process, but worthwhile.
Wow! Changing a law to start a business that is definitely going to be a task, but as long as it’s worth it, it probably won’t feel like work at all.
Budget is actually a work I like very much. But I also love frugality so the two go hand in hand. Planning is so important in so many aspects of our life – from business to finances to what we are making for dinner! The better the plan, the better things will work out in the end.
Denise, I completely agree. Especially about planning dinner :) I need to know what I’m going to eat or I get cranky! lol
This is one of my weaknesses. I’m a great big picture guy, but the details/nitty gritty, not so good! I’ve read all the books, know what to do, but execution escapes me….I’ll just keep trying.
Dr. Dean, I’m sure you are also good at surrounding yourself with the right support system though. Otherwise, you wouldn’t be where you are now. At least you know that’s where you are weak and building with the right partner would be essential.
I love planning and making lists … sometimes more than I love actually executing those lists! Planning allows me to dream, and to hash out the details of those dreams. It’s one of my favorite activities. :-)
Me too Paula! I have an entire book, it’s what I call my idea book. I will write down everything that comes to my head, since I have so many different ideas. Then if I forget to excecute or something else comes along at least I have a record of it. I once planned an entire business in the book, but abandoned it after I realized that I didn’t want to work it. But that’s something that I can build into a business plan and sell it. Just keep track of your lists!
I’ve never really thought about making a personal finance plan. I know I probably should, but I just keep my ideas in my head.
I’ve found that I have even more ideas come to me when I get them out on paper. It must be something about making room for more. You should try it! :)
Goals without a plan is just a wish or dream! The plan helps you execute and helps you stay on track to your goal. Writing it down helps you focus and guide you through the maze to your goals. It is very important part of success.
Very true! I’m sure you teach your students about SMART goals. I’ve always seen them work for me and I just wish more people would use them.
I always hated writing the executive summary because it made me actually think about what my goals were. It’s very important in planning.
I love the correlation you made between a business plan (as a business major I know these all too well) and your personal finances. Perhaps a SWOT analysis can be done while performing the saving/spending plan (aka budget :P ) Nice article.
oooh, SWOT anaysis. Sounds like we need a part II :)
Excellent post LaTisha. There are so many parallels with business and personal finance. Like some others above I’m better at the big picture planning than the daily details. Big life plans keep me balanced and moving forward.
Thanks Hunter! I think if we had more people study business, we might have a stonger economy.
Hi Latisha,
I have an excel spreadsheet to keep track of my finances and update it once a quarter. It’s good to make sure the direction is correct and whether I’m on track or not. It’s fun!
Thanks for contributing!
Best, Sam
Thanks Sam, once a quarter? I use excel as well but I’m checking every penny each pay period. Maybe once I build up a larger networth I will be less of a control freak :)
We should keep in mind that our income is our money. Hence, goal setting, planning and taking action for the business where we get our income should be taken seriously because our future depends on it.
Exactly! It’s so important to keep track.
Great ideas… you can’t know how you’re doing if you don’t keep track, especially when it comes to investing. It seems we give ourselves the benefit of the doubt… or, when times are bad, just turn our eyes away. Thanks for reminding all of us that check ups are necessary for financial health.
I know that after September, I am not very happy checking my investments as much. But keeping an eye on them when things are good and bad prevents too much emotional decision making.
Even in a corporate environment we have to produce a business plan each year, and often times it’s for several years out. I’ve really tried to implement this in my personal life, since it helps with short, medium, and long term planning. I always try to stress that corporate finance and personal finance are very similar, and we can learn a lot from one that can be applied to the other
Imagine how much better decisions we all would make if we created a strategic business plan for our finances and careers. I think there would be more attention paid to potential opportunities.
Great post. I don’t have much experience with business plans. Thanks for breaking it down. I also need to apply this to my personal finance plan. Thanks for the kick in the rear!
Get it going Buck! lol Just getting through the business plan for the first time helps you realize why so many small businesses fail. You really have to create a plan and constantly evaluate and stick with it.
I love to plan but sometimes I’m guilty of planning at too high a level, without drilling down to the level of detail needed to be effective. Great point about the budget being a negative term, too. I used the same example in a class I taught last week. Great minds…
That’s one thing that I actually do also. I need to make sure to set specific goals in order to reach them. I’ve got a post on this coming soon.
I’ve learned to like the word budget. It helps me meet targets I set for myself and is a great reminder that I don’t need to buy things that end up turning into clutter. I also try to keep a list of personal and career goals handy and check my progress several times a year. It feels great to accomplish things!
Exactly! It can be a good word especially when it brings you closer to success.
My plan since graduation was to save a decent amount of money aside from the future. Now it is on building up my own skills and capacities so I can get out of the rat race. It will be a real challenge, pushing myself out of comfort zones, but there will be many benefits as well.