Have you started a new business, or are you contemplating finally launching that venture that has been on your mind for a long time? If you want to succeed you’ll need a plan.
You don’t need a fancy business degree to be successful, but you do need vision, determination, organization and hard work. A functional business plan is a good place to start. This article will give you 20 “practical tips” that will start your business off on the right path.
1. A business plan isn’t a school assignment.
Some people approach a business plan like a school assignment: i.e. there are 20+ “sections” that I need to do in order to complete it. This is a mistake. Your business plan is not a school assignment. There is much more at stake than just “filling in the blanks.” You have to be thinking survival from day one. How are you going to realistically get this business off the ground? How are you going to realistically make money?
2. Think substance over form.
Don’t worry as much about the form. The substance is what really matters. If you spend more than about half an hour looking for templates on the Internet then you’ve wasted time. Form isn’t what is important. You don’t need a fancy program or template. A simple word document will suffice. What is most important is that your plan has substance–it defines a marketable product, a logical and effective plan for growing revenue, and a sound understanding of the potential expenses, competitive pressures and risks involved in getting this venture off the ground.
3. Don’t overcomplicate it.
Think of the “pitch.” If you had to explain what you do, and whom you do it for, in one minute, what would you say? If you had to condense your business plan to one page, what would be the most important things to include on that page? These are very important questions to ask yourself from the outset. Pages and pages of market analysis sometimes doesn’t do anything to clarify your strategy, and it only serves as a distraction to the most important issue: how are you going to create a cash flow before you run out of money?
4. What do you sell, how much do you sell it for, and who buys it?
This is a critical piece that is fundamental to a good business plan. What is your menu of products or services? What do you sell? How much do you sell it for? Who buys it? Are there any other people, or companies that may want to buy it? How do you make money now, and how will you make money in the future? If you can’t answer these questions, then you shouldn’t be in business at all.
5. Be realistic.
I don’t doubt your ability to change the world. I don’t doubt your ability to be the next tech billionaire, as long as you can answer this question: specifically, how are you going to do it? What idea gets you there? How does it get you there? There is nothing wrong with audacious goals (in fact you should set them) but you need a realistic plan to achieve them. If you set a wild goal in your business plan then you need a very technical action plan that gets you there. Wild, unrealistic financial projections without a reasonable action plan are a waste of time. If you can’t produce a specific, and logical, action plan then you’ve set an unrealistic goal.
6. Cover the important stuff, and only the important stuff.
Cut the fluff. Keep it simple. Keep it crystal clear. What is the important stuff? The stuff that makes you money and keeps your business alive: understanding what you sell, how you produce it, who you sell it to and for how much, what your process is for making it all come together (including who is going to do what), what your expenses are (and whether you have undershot them), who or what your competition is, and what the material risks are in starting this venture.
7. Do the research and digest it.
Find out what you’re dealing with. Take some time to research the market that you are entering. Find out who the major players are. Find out what the international competition is like. You don’t want to get bogged down in a research abyss, but you also don’t want to shoot from the hip either.
8. Who is your competition?
Understanding who your competition is shows savvy and maturity. Sometimes your competition isn’t another business; it’s a completely new technology that may render what you do obsolete. Also, with the Internet, you have to look internationally these days. There is no other choice. You are playing in a global world now, whether you like it or not.
9. List your assumptions.
This will be most important when you get to the financial forecasting part of your business plan. Those numbers (as fun as they are to put down on paper) are based on a set of assumptions. List what the assumptions are and then incorporate them into your action plan as target goals. That way, if the assumptions manifest, then your financial projections will as well. By listing your assumptions you are brining reality to focus.
10. Develop a laser focus.
Yes you may have the confidence to succeed in any industry, however if your business doesn’t have a laser-like focus, it will likely fail. What does your business do particularly well? What is the product or service that you can be a market leader in? What is it that people will talk about? Narrow it down–before you launch.
11. Set specific, time-based, goals for the business.
Being a “millionaire” and “financially free” isn’t good enough. You need to set very specific goals for the business–quarterly, annual and bi-annual goals, with specific action benchmarks that you can track. Setting out defined goals crystalizes your focus and gives you a way of tracking your progress
12. Be specific in your action plan.
What specific actions are you going to take place in the first month, the first quarter, the first year? What are your priorities? Where are you directing your focus initially? Don’t leave it to chance. Have a specific action plan that you can track. You’ve heard it over and over: many businesses fail within the first year. Time is against you; you need to be as strategic and organized as possible. Set time-based “action targets.”
13. Chunk it down.
Break down your action plan into chunks. For instance, you have a marketing objective of penetrating a particular segment, then chunk it down and define how that is going to be accomplished. Chunking is powerful because it clarifies focus, sets definable targets that you can measure, and serves as a form of accountability (either you’ve accomplished the chunks or you haven’t).
14. Highlight your progress.
The business plan is not meant to be a project that sits in the file for the rest of your life. It isn’t just a school assignment (see point #1). It is the foundation of your business. It is meant to be a living document. Keep it with you. Literally keep it in your briefcase (or whatever else you carry around). Refer to it often, possibly even daily. If you’ve done a good job, your plan will serve as a compass. It will direct what you are going to invest your time in every single day.
15. Include all essential parts.
Remember to include the important stuff (see point 6). Just make sure that you don’t leave any of those important parts out. If you can’t explain to me what you sell, how much you sell it for, how you are going sell it (and what is involved in that progress), how much it costs to produce, distribute and market your product or service, who your competition is, and what the risks are in your undertaking, then you’ve probably left some stuff out. Also, if you don’t have definable goals, targets and a specific action plan then you probably have some work to do.
16. Where are you weak?
This is closely related to the principles of being realistic, knowing your competition, and stating your assumptions. How well do you know your business? How well do you know what is really involved in making this a success? If you are able to state where you are weak then you know your business well. Also, when you know where you are weak you can make a plan to correct your weaknesses.
17. Update the plan as you go.
Things change. You’re not going to be able to predict everything on day one. Some of the products you think are going to take off may fall flat, and from out of nowhere a new revenue opportunity may present itself. Expenses are often higher than you anticipate, and your financial projections will probably come in lower than anticipated. All of that is OK. Remember, this is a living document. Adjust as needed; make new goals, new plans. The important thing is that you are moving forward in an organized and effective way.
18. Learn from experience.
Use what happens to your business to inform the ongoing drafting process. There is only one way to get experience. You can’t get real entrepreneurial experience in school. You have to learn it the hard way. So as things happen, treat it as education and adapt your ongoing business plan taking into consideration the lessons you learned through experience.
19. The plan should reflect your thinking and personality.
Don’t feel like you need to duplicate someone else’s methods. If you aren’t comfortable using a certain style, then get rid of it. There is no right method. Your plan should reflect how you think, and how you work. If it doesn’t, then it will just sit in a drawer. It becomes just a school assignment, and is a waste of time. It has to resonate with you. Put your own personal touch on it.
20. Gloss is nice, but results are better.
Gloss and polish look nice, but a glossed up business plan full of fluff, without actionable steps, and a reasonable strategy to actually make money, are useless. Remember substance always rules over form.