Think of running a business like taking a trip. You have a great vision for where you want to take your company (your destination). To get there, you have to navigate through a field of land mines (insert dramatic music).
Here’s the thing, millions of people navigated this field of land mines before. Some made it, while others failed. The great news is that many have shared their experience, which helps tremendously to light your way. Your business plan allows you to map out where the huge land mines that claim most victims are and navigate your way around them.
Writing a business plan doubles your chances of getting a loan and can increase your chances of securing investment or growing your business.
However, so many people make the same mistakes in their business plans, which hurt their success chances and frustrate potential investors. You need a good plan, but it doesn’t have to be perfect for you to start your business.
Here are some tips to keep in mind while building your business plan:
- Cover the important stuff & get moving
Don’t wait until you have the perfect business plan. It will never be perfect. Cover the most important points that will let you to hit the ground running and overcome the biggest obstacles. You will add to it and evolve later (keep reading).
- Include all essential parts
A business plan has three essential building blocks. There is the analysis (market, industry, competition), action plan (people, operations, sales & marketing), and projections (traction & financials). You and your investors will want to have a balanced coverage of all these parts to ensure your business does well. Here is a business plan template if you want more details.
- Do your research and digest it
It’s simple… the more you understand your customers, business, and competitors, the better your success chances are. You can learn through research and actual interactions with customers. If you haven’t started your business yet, spend some time to learn as much as you can about your customers and how your industry works. It will save you a lot of time and trouble. Analyze and digest your research and keep the conclusion in your plan. Don’t expect your reader to figure out what the data means.
- Learn from experience
After you start your company, the customer behavior and feedback will give you more information to integrate into your analysis and refine your strategy.
- Laser focus
Make it super clear who your target customers are, what problem you will help them solve, and how you will solve it (what makes your solution great). You can refine, adjust, and/or expand that target after starting your company (see point 1).
- Learn your industry
You need to know how your industry works (laws, business models, key suppliers, technology being used, etc). It is great if you already worked in the industry before, but you can also read books and do extra research to learn how things work in your industry. Quora is a great Q&A based social network where you can quickly learn about a topic. It’s where I start my research.
- Know who else is serving your customers
Your customers have choices. They will choose to either go to you or others. Know how you stack up against competitors from the eyes of the customer (price, quality, service quality, etc). Don’t obsess over “beating the competition”. Know enough about them to differentiate yourself (i.e. so your customers pick you), but save your energy to focus on the customer.
- Be specific in your action plan
Spell out what will be done (operations), who will do it (management and people), how much it will cost (financials), how you will get it to your customer (marketing). Pay special attention to the people part of the plan. It’s the most important thing investors look at when deciding to invest (or not) in your company.
Instead of saying “We will provide the best service to delight our customers”, say “To provide exceptional service, we will have a 24 hour response time policy to all inquiries and personalized follow-up for every new customer”.
- Highlight your progress
Include any results you have so far (a prototype, subscribers, paying customers, growth). All this shows traction, which will validate your business idea. That will make investors more comfortable knowing there are tangible results.
- Update the plan as you go
You will learn a lot after starting your business. Take time to reflect on your experience and improve your plan. Your business plan is a living thing that will adapt, and improve as it grows. Many assumptions you will make will be replaced by actual figures (e.g. % of visitors that will convert into customers). This will influence your action plan and projections.
- Polish it
Once you have the content in your plan and its time to present it to investors and other outsiders, clean it up. Fix the spelling and grammar, remove parts you repeat yourself in, add figures and visuals (product samples/screenshots), add page numbers… you get the idea. If you’re not presenting it to anyone, then no need to polish it. Invest that time and energy into your business instead.
- Breathe some life into it
The plan should reflect your personality. I’m not proposing you add circus lights and unnecessary fluff, but the reader should prefer to read it instead watching paint dry. Make it flow like a conversation and look to reflect whom you are.
- List your assumptions
You will have plenty of assumptions in your plan (e.g. best marketing vehicles, how many visitors will convert to customers, how quickly you can hire the right people, etc). Think of assumptions as a hierarchy of three types:
- The hunch you pull out of your head.
- The educated guess backed by research and past experience.
- The validated assumptions. These are based on actual experience (we set this price to x and sold this much). These are more solid.
Know what assumptions you’re making, list them, and revisit them often.
- Make smart projections
Whatever you do, don’t make top-down projections (there are x number of customers in the world, if we get only 1% of them, we will make so much money). Instead, find out how many potential customers there are that are relevant to you. Find out how comparable businesses to yours are doing. Incorporate build-up into your plan (i.e. add customers in a step process vs. getting them all at once). Launch and adjust your projections based on actual results.