New to Business Planning? Start With a Basic Business Plan

Why would you want to write a basic business plan as opposed to a more elaborate one? Most business owners I know struggle with the idea of writing a full-blown plan for their business. To be completely honest, writing a plan for anything, let alone a business you own or intend to start, is challenging because…

1. we don’t know where or how to start
2. we want our plan to be perfect the first time we write it – as in, we don’t want to make any mistakes
3. we don’t like to write – and let’s face it, writing a plan involves writing.

I’m going to share with you ways to overcome each of these hurdles. But before you do anything, allow yourself to break the process of business planning into small steps.

The first step is to have a basic plan which will serve as the foundation for a more detailed and comprehensive plan down the road.

How to Start Writing Your Plan

What goes into a basic plan? Well, let’s first define a basic plan as a plan for the bigger plan you will arrive at later on.

Here are the essential questions you need to answer:

1. What do you want to gain by writing this plan?

Is this plan an internal plan which you will use to guide yourself or your team towards achieving specific and measurable targets? Or are you aiming to attract potential investors? Is this something you would like to take to the bank to propose a loan for your business?

Begin by examining what your specific goal is for writing your plan.

2. Who is going to review my plan, and what do you want them to do with it?

You need to identify who is going to actually study your plan, and what they are going to do with it. If it’s yourself, then it’s a little easier to answer this question because the answer lies within you.

If, however, you are writing your plan for others to review, and assuming you’ve answered #1 above, you’re going to have to do some background analysis.

Start listing names or titles/positions of people who you expect to review your plan. Then, for each person, brainstorm how you want that person to react to your business plan – what they should do with it.

You could do the same thing for investors – do you know any business owners? Ask them what they would look for in any business venture they would invest, and specifically what they would look for if you wanted them to invest in your business.

3. What is the core product or service your business offers to buyers?

To answer this, write down the product or service you intend to offer as simply as possible. We’ll answer more detailed info about it in the following questions.

4. Who is the ideal customer for this product or service?

Really, ideas for business are a dime a dozen. You often hear people talk about a great business idea they have, but they rarely back it up with any kind of proof that a customer exists for such a product or service, and that that customer would be willing to pay.

Try to be specific in profiling your buyer. For example, does your product or service cater to men or women, or both? What age groups or income levels does it service/attract? Are there any geographical areas that your product or service would supply?

5. Is there enough demand for your product or service?

This is something you’ll want to investigate in more detail as you develop your business plan. At this point though, what’s important is to do some preliminary research. Searches on Google, Hoovers or Bizminer will help you study a particular industry, and you can often drill down your research to a particular state or city. Your search at Google is of course, free, but you’ll often find for a small investment at sites such as Hoovers or Bizminer, you’ll get meaningful data for your market vertical, which you can start analyzing right away.

It’s also not a bad idea to survey buyers on their purchase behaviors and perceptions towards your product or service. Arranging a questionnaire or focus group can give you some useful insight into how potential buyers react to your product or service.

If it’s reasonable, consider giving away product or service trials and then follow-up to evaluate user expectations and experiences.

If you don’t have demand for your product or service, it really doesn’t matter how great it is anyways, right?

6. What existing problems or needs does your product or service solve for your customers?

This is one of the most important questions to answer, because ultimately, your product or service is just another one available unless it clearly and uniquely solves a problem or need which buyers face.

To give an example, let’s say your product is a software application that helps you manage your finances and taxes. There are a few applications in the market which do that already. So, what does your application do that others don’t? Is it better on features, is it faster? Is it more secure? Is it more user-friendly? Is it more portable? Does it really help someone save money or increase their net worth?

Can you see why getting clear on the solution you offer to your target market is so crucial?

7. Who are your direct and indirect competitors?

You really should gain at least an initial understanding of who else is offering similar products or services to your target market. It’s good to know how their products or services are currently used and perceived – why people buy them, and why they don’t. In doing so, you begin to understand the strengths and weaknesses of your competitors from the consumer’s perspective.

Depending on what your product or service is, you can find all kinds of information about user experiences with your competitors’ offerings. Sites like Amazon let you see product reviews by customers who bought products.

8. What do you need to get your business rolling/growing, and what will it cost?

This is arguably the most painful part of business planning. Yet, what is the point of having a plan if you don’t know how it all adds up financially? You may not know how to put all the numbers together on your own. If that’s the case, invite or even hire someone to help you sort out the numbers.

Aside from any potential revenues earned from sales of your product or service, you’ll need to know your fixed expenses – what it costs you to run your business whether or not you sell a single item, and your variable expenses – what it costs you for each item sold.

Naturally, in the early stages of planning a business, you will be doing a lot of forecasting, and your numbers may not be as accurate as you’d like them to be. So, you’ll want to be as conservative as possible about how much revenue you’ll generate and how much your business will cost to run.

9. Putting your plan to action – what are the key steps you need to take?

At some point, the plan needs to hit the road! The plan is no good if it doesn’t help you take action. So a simple action plan should be included – what needs to be started and completed, when and who will do it, all need to be mapped out at least at a basic level.

Having an action plan will also help you get excited about your business venture, as you can see how it comes to life.

10. How can you improve your plan?

Once you’ve answered these questions, you have a basic blueprint of how your business is going to look at the early stage.

Remember, your first step is to prepare a basic business plan that serves as a foundation. From this foundation, you will want to further explore areas which need more analysis and testing, while some aspects of your business venture merely require you to get started and measure how things are going.

The Business Plan

I have written three business plans for my own businesses. Two were for existing businesses and one for a Start up business (BOOST Business Coaching). The two plans written for existing businesses were written entirely on the prompting of Bank Managers as I was borrowing resources to invest in these enterprises. As a consequence once I had achieved this aim, the plans went into hiding and were never relevant again. In these cases the business plans were great for funding but had little else use.

The Business Plan

The latest business plan written by me was for entirely different reasons. I actually had to discover whether there was a market for my services. As a consequence of this I now have a ‘living document’ that is referred to and updated on a continual basis as my business grows and changes. The best part of this is when different tactics have been actioned and the results have been less than anticipated I have a plan B and a Plan C and can action these seamlessly into my business.

What to include in the business plan

Many people get stuck on what to include in the business plan, and to be fair every business is different along with every business structure so here is some food for thought when it comes to writing your business plan.( We do have templates for all sorts of scenarios – contact us)

1. Before you get in too deep, take a step back and outline a clear vision for YOURSELF, what the business looks like the day before you sell it. This will then se the framework for the rest of your plan by enabling you to start on the end result and work your way backwards. No-one said it was rocket science! Commonly known as an exit strategy.

2. Include Budgeting. You can’t run a business without cash. When you start your business the immediate concern is Cashflow however some consideration should be given to Cashflow, The income you draw from the business, the profit the business makes and your equity in the business. This is an important part of the business plan

3. Customer Focus. If you have customers ask them what they really want your business to deliver. If you are starting a new businesses go to your future competitors customers and ask them what they would really like to see. Then use this in your planning.

4. While we are talking about competitors – Research them, what do they do well, what are they not so good at, their strengths & weaknesses. Use this information and fill the Gap. If possible don’t compete head on with anyone on price – always differentiate.

5. Risk – A lot of people think that entrepreneurs are risk takers. They aren’t. They always analyse the risk before acting. Yes – an element of risk taking is necessary but the lesson here is to minimize as much as possible.Do this before you open the doors with the business plan

6. Once you have the draft of your business plan together contact an independent advisor or Business coach who can give you ‘independent’ feedback. A Family member or friend will also be useful however remember that they may not be as ‘independent’ and will provide feedback based on other factors

7. Expect the unexpected. No business plan is going to work exactly how you want it to, so make sure you have necessary measures in place to cover any problems you may encounter. Have a plan B and C for those tactics.

Don’t skip the business planning process Make sure you have a bigger chance of success.

Ten Things Not To Do When Launching A Business

Having spent the past ten years working as a consultant and business coach for entrepreneurial endeavors and investor-driven startups I’ve witnessed a lot of mistakes really smart, highly motivated professionals make on their way to market. When you sit back and examine them, they seem fairly obvious, but in the heat of the launch even the most seasoned entrepreneur can lose his or her perspective. Here is a list of “don’ts” based on some of the most common missteps I see, year after year:

1.) Don’t fly by the seat of your pants. You need a business plan. Eight of the top reasons businesses fail, as identified by the Small Business Administration, can be traced back to a lack of sound, strategic business planning. The ninth? Inadequate business planning. The value of planning is in the process itself. When done well, it forces the entrepreneur to think through potential risks and develop contingencies.

There’s a movement in the blogosphere of young technology entrepreneurs that proclaim, “Just do it…don’t bother with a plan…it will just slow you down”. This is the worst advice I’ve ever heard. Just because some youngster struck it rich writing the code for a widget that caught the attention of Google doesn’t make them an expert in launching a new business.

2.) Don’t assume just because there’s a need there’s a market. If there’s one thing we’re learning from Applied Behavioral Economics is people, and entire organizations for that matter, aren’t as rational as we once thought. Approximately 70% of economic decision making is emotionally-driven. There could be myriad reasons your market isn’t ready for your product or service, none of them relating to what appears to be a rational need.

3.) Don’t develop your product or service in a vacuum. Get your target prospects involved early and involve them often along the way. Making meaningful calibrations early in your development process is exponentially cheaper than making the same changes during your sales launch. Be customer-centric!

4.) Don’t price your product or service solely on the competition and never price by formulating your cost plus a desired margin. While competitive pressure may influence your pricing, it shouldn’t define your value proposition. If you price too low, you may be sending the wrong message and once your prospects are anchored to your price/value proposition they’ll never forget it. It is very difficult to raise your prices once expectations are set. And remember, except perhaps for Walmart, very few businesses have discounted their way to success. Quantify and validate your pricing decisions.

5.) Don’t be overly optimistic about your revenue projections. Until you engage the market, you don’t know what you’ve yet to experience. Be brutal with yourself regarding your pro forma financials. Make painfully conservative revenue projections, then cut them in half. Now, cut them in half again. Is what’s left still a viable business?

6.) Don’t underestimate the sales lag driven by early adoption rates. It takes time to establish your presence in the market. If you’re launching a disruptive technology (an entirely new technology or methodology that challenges the existing dogma) anticipate it will take you twice as long to achieve traction as you initially thought.

7.) Don’t discount the level of noise your target prospects have in their world. People are bombarded by anywhere between 3,000 and 5,000 marketing messages per day. Just getting an appointment with a decision maker is ten times more challenging today than it was just a few years ago. Expect your prospects to be overworked and remarkably busy.

8.) Don’t assume you’ll be able to get seed-funding. There have been dramatic shifts in the angel investor, venture capital, and private equity landscape in just the past few years. Plan to bootstrap your way to your launch threshold. That’s where the funding action is today, in commercialization, not development.

9.) Don’t bet the ranch on social networking. While the marketing tools have changed, the fundamentals remain pretty much the same. You may be able to build a large following and generate a bit of a buzz, but if you’re not positioned to commercialize and convert this traffic and attention it is a waste of time. Social networking is a tool, not a strategy.

10.) Don’t go it alone. Find some seasoned help, whether it is through S.C.O.R.E., a coach (with applicable skills and expertise in startups), an experienced strategist, or a trusted advisor. You need someone that can challenge your assumptions and, at the very least, be a sounding board. A planning template or software program does not replace the wisdom that comes with experience.