So what’s your plan?
Many small businesses today are launched with little more than a bright idea in someone’s head and a few notes scribbled on a piece of paper. Unfortunately, these businesses usually fail. Studies have shown that small businesses with a solid, written business plan are more likely to get loans from banks and funding from investors, and ultimately are more likely to succeed in the marketplace.
If you don’t have a roadmap for where you want to go, you might end up totally lost. Here’s a practical, 5-step guide to establishing a viable small business plan.
1. Define exactly what need your business fulfills and how it will do so better than others
You must have a crystal-clear vision of what the business will do, why people need what it offers, and how you will meet those needs better than your competitors. You need a well-researched, thoughtfully written mission statement addressing all of these factors.
Identify what makes your business unique — it may offer a better product, better price, better service, better location or better something else. But, it must offer something that is better than what the competition offers, ideally something that makes it stand alone in the marketplace.
2. Know your customers and figure out how to win them
Research your target market exhaustively, not just with a few web searches but with some hard legwork — talking to providers, customers and experts in your industry. Identify the specific customers you’re targeting and learn everything you can about them — where they live, how they shop, what they read, why they buy. Then develop a strategy for reaching them effectively and convincing them that they need your product. Commit this strategy to paper.
3. Know your competitors and figure out how to beat them
The global marketplace has never been more competitive, with vendors worldwide offering goods and services that may be in direct competition with yours. Find out everything you can about the competition — what they’re offering, what they’re not offering, and how you can outshine them in the marketplace.
Then develop a viable marketing plan to convince customers that you offer a better product.
4. Take a hard look at your real costs, and don’t overestimate your revenues
This is the most important part of your business plan — how much money will it cost to launch this business and keep it running? It’s far more important to identify your realistic costs than to dream of your potential revenues.
Overestimating your profits and underestimating your costs is the surest route to losing your shirt. How much cash do you need to get started, how much to survive for a year, how much revenue will you need to offset the costs, and what will it take to break even? If you don’t have the money yourself, you’ll need realistic projections to convince investors or banks to back you. But if you can’t make these numbers work on paper, your business is at risk of failing before you even get started.
5. Write up a professional business plan, share it with your team, and keep it updated and relevant
Stop scrawling on napkins. Put in writing a sound, professional business plan that you would be proud to show to your employees, your customers, your business associates and your mom.
A good business plan typically includes all the things mentioned above, along with a company profile, bios of key members, market research, product plans, goals and objectives, promotional strategies and revenue streams. There’s software on the market to help you write a complete business plan, but that won’t make it a good business plan. The hard part is up to you.
You may also consider pursuing a degree in business, which can equip you with the know-how to start and run a successful business of your own. You may use a formal business plan to seek investments or loans. You may use it to clarify and update your own thinking on the direction your business should be taking. You can and should use it to inform your team of the company’s goals, strategies, progress and setbacks.
But the first step is to make a plan…
What you shouldn’t do is stick the plan in a drawer and never read, update or share it again. Make it a living document. Your plan can and will change.