Monthly Archives: April 2016
Benjamin Franklin has been quoted as saying, “If you fail to plan, you plan to fail.” Whether or not he actually said it, the idea behind it still holds true. Your business stands a better chance of succeeding when you plan carefully and consider every factor that may impact it.
This doesn’t just mean jotting down your thoughts and ideas. You need to take the time to actually sit down and create a well-crafted business plan. Just as a cake is the sweet reward for following the recipe, a successful business is the reward for creating a well-thought-out business plan.
Many new business owners are intimidated by the thought of developing a business plan. Many parts of it require some research and dedicated study on your part, in order for you to be able to discuss those components in the plan, and then implement them when you’re ready for action. Your lack of knowledge may be scary at first, but it is also enlightening: It is better to identify what you need to know now, than later, when your lack of knowledge might adversely affect your success.
But where to begin? Free business plan templates can help. They provide guidance by outlining the different parts of a business plan. You can choose a simple business plan template that you can finish in a few minutes, or a more comprehensive template that covers funding, market analysis, financial projections and other minutiae of running a business.
Entrepreneurs are often advised to write a business plan before they officially start their business. The act of writing the business plan will help focus on the details, find items that were not previously considered and fine-tune the approach to running a successful business.
Before a formal plan can be written, however, there are a few key elements you’ll need to work out that will ultimately help you craft that document. Entrepreneurs and business experts recommend taking the following steps before you sit down to write your plan.
Determine your purpose
The primary purpose of a business plan is to show investors, lenders and other potential stakeholders how your company plans to make a profit. Profit is important, but it’s far from the only thing that matters when you start a business, experts say.
“Business plans can be helpful tools to clarify … business activities, [but] they … encourage entrepreneurs to focus on what they are going to do,” said Alan Williams, co-author of “The 31 Practices” (LID Publishing Inc., 2014). “This overlooks two more important questions: ‘why’ — why it exists and why employees would want to get out of bed in the morning, and ‘how’ — the values of the business, what it stands for, how people representing the business will behave.”
Williams noted that entrepreneurs should take time to identify and articulate their business’s core values and purpose, which will serve as your organization’s compass for decision making at all levels. Williams’ co-author, Alison Whybrow, said that this “compass” can be discovered by having an honest, open conversation with your team.
Build your vision
The key to business success is having a clear vision of what you want to accomplish as a company, experts say. But before you write a business plan, you should come up with three to five key strategies that will enable you to achieve that vision, advised Evan Singer, general manager of SBA loan service SmartBiz.
“Sometimes, less is more,” Singer said. “It’s far better to do three things very well versus 10 things not so well.”
Clarify your business model
A good business plan always includes financial projections, but before you can figure out facts and figures, you’ll need to work through potential scenarios to make sure your business model is going to work.
“Start [answering] ‘what ifs,'” said Alex Muller, CEO of retail mobile engagement platform GPShopper. “If I sell this product at this price point, and this is the cost of client acquisition, what rates of return can I get? When you’re done building [and testing] the business model, then you can go back [and] write a business plan.”
Muller said a good financial model should include many of the details you would put in your formal business plan — for example, hiring, pricing, sales, cost of acquisition, expenses and growth. As with a business plan, your model should be revisited and updated as the realities of your business start to unfold, Muller noted.
Work out your name and legal structure
The way your company is structured — sole proprietorship, LLC, corporation, etc. — plays an important role in your business operations and strategy. David Pomije, CEO of jewelry e-commerce retailer Bijouxx Jewels, noted that it’s important to not only officially register your company, but also to ensure that you own the naming rights before you work on your business plan. The last thing you want to do is put your company name all over the official documents and website, only to find out that someone else holds the copyright, Pomije said.
Identify your target market
Of everything a new business owner or entrepreneur thinks of, the most murky is often the target market, or the ideal group of people for whom the product or service solves a problem. Grant Leboff, principal of Sticky Marketing Club, says to answer the question, “Why am I uniquely placed to solve the problem?”
“If you are unable to answer the question, you either have the wrong target market or the wrong offering,” Leboff wrote in a blog post. “In this case, more work will need to be done before you start targeting your potential customers.”
By painting a picture of the customer and then looking internally at your company, you can determine if what you have to offer is the most attractive to the type of client you want, Leboff said. If not, you may need to change your offering or define your target market differently.
Test out your business idea
There’s no point in spending time on a formal business plan if you’re not even sure there’s a market for your idea. Kara Bubb, a product manager at digital asset management software Widen Enterprises, said entrepreneurs should go out and talk to industry experts, potential customers in their target market and other entrepreneurs to determine their business’s viability.
“Talk to some real potential future clients [and experts], and ask for some honest feedback,” Bubb told Business News Daily. “What do they think about your business idea? Who, specifically, are you targeting with your business? How big is the market? Will your market buy what you are selling? Who is your competition?”
Bubb also recommended identifying your potential opportunities and risks, which can be done by conducting a SWOT (strengths, weaknesses, opportunities, threats) analysis of your business.
Do share your plan
If you want your company to succeed, then all employees should understand the business plan’s dynamics. It is not a document that you should lock away.
“The business plan keeps an organization focused, [and] it needs to be shared,” Cohen told Business News Daily. “Too many companies treat it as a confidential document to be kept away from the ‘prying eyes’ of the rank-and-file employees. I believe the business plan should be shared, discussed and amended where appropriate, through an open loop of feedback and insights.”
The more people who are involved, the more ideas you can circulate around the company, Cohen said. It is important to consider every worker’s input to ensure that the outcome is something that’s pleasant to all.
Do follow an outline; don’t go overboard.
You don’t need to have an over-the-top, elaborate document, fancy formatting or flashy decor. However, much like a road map, it must make sense to you as well as to your company’s employees.
Start your plan, said Cohen, by using a specific outline called SWOT, which stands for strengths, weaknesses, opportunities and threats. First, create an executive summary, in which you describe in what field you wish to succeed, and how and why you intend on doing so. And then, list your company’s strengths and weaknesses as well as opportunities for growth, and detail the threats to it that might hinder the achievement of those goals.
Do conduct research — don’t “wing it.”
As with any business project, research is absolutely critical to a solid business plan.
“Research is one of the big value-adds of writing a business plan,” said Joseph Ferriolo, director of Wise Business Plans. “Research forces companies to learn what they can expect to make and what the industry trends are.”
If the research indicates that your idea is viable, then you can proceed by writing down the goods or services you offer, your marketing plan, how much funding you need and your goals. For more ideas on specific points to include in your business plan, check out this Business News Daily article.
Do put it to use — don’t file it away.
Your plan is there for a reason. Don’t be afraid to refer to it as much as possible — think of it as checking the map when you’ve made a wrong turn. There is nothing wrong with using your plan to get back on track or to remain there.
“The biggest mistake people make is this: They prepare the document and then put it in a drawer and never look at it again. That’s self-defeating,” Cohen said.
Finally, remember that you should revisit your business plan as your company grows.
“Don’t just make the business plan and use it for funding — really benchmark your company against it,” Ferriolo said. “Reference the plan monthly and quarterly, and revise your research and estimates as you proceed. Being accountable to the vision you set forth will help keep you in line and successful.”
Editing and updating is always a good idea, too; you can never make too many revisions. Cohen said that a business plan is “a document that is never complete.”