Open for Business: 5 Keys to a Successful Business Plan
Every new business venture starts with an idea. But how do you get from a solid business idea to opening day? The steps to success lie in your business plan. If you already own an established business, you will want to update your original business plan each year to reflect changes in the market, financing or customer base. For either a new plan or an update to an existing one, using a basic framework removes any guesswork and fills gaps.
“The beginning is the most important part of the work,” Plato wrote centuries ago, and nothing could be truer for new businesses. Entrepreneurs who write formal plans are 16% more likely to achieve viability than identical non-planning entrepreneurs, according to a 2017 study published in Harvard Business Review. In the competitive world of entrepreneurship, every edge is one more rung on the ladder to a viable, growing business.
With a total US business growth rate of 44% since 2000, and woman-owned businesses growing by 114%, many new business owners are riding the wave to successful entrepreneurship. So, first create or update your business plan, and then begin!
1. Keep it flexible.
A traditional business plan starts with an executive summary followed by a company description, market analysis, organizational structure, service or product, marketing and sales, any funding requests and financial projections.
“Lean startup” plans rely on certain elements, like key partnerships, activities and resources, customer relationships and segments, a value proposition; and cost structure and revenue streams, to cover those bases, and allow more flexibility in making minor adjustments on the fly, without having to do a formal update.
Choosing a business plan format that best fits your company may depends on its size, scope of product or services, and whether you are trying to woo investors or plan on bankrolling the startup out-of-pocket. A choice that the Boost Midwest team is skilled in helping their clients pick.
Templates are available for both traditional and lean startup business plans. A great place to start your search is at SCORE, a nonprofit network of expert business mentors that partners with the US Small Business Administration.
Remember, your business plan may change as you move forward. So, keep it barebones and loose at first so you can synchronize the plan with other key startup activities.
2. Know your value.
What is special about your product or service? Does it fill a gap in the current market? Or does it have an advantage over similar, established products? Your business plan should include a clear and compelling statement that speaks to the unique value your company will bring to the market.
3. Know and plan for your customers.
Have a clear picture of your target market. Who or what will your company serve? Knowing your specific customer base is the first step to creating a stellar customer experience. A B2B company can have a different target market than a direct-to-consumer market, even if the products and services are the same. The same holds true for a storefront vs. an e-commerce store.
Your market helps inform you and your team on how your customers will interact with your business. Then, do a walk-through for each type of customer experience, from start to finish. Note any stumbles they may encounter, and include them, and the solutions, in your plan.
4. Plan your marketing campaign.
In order for your business to succeed, you need to attract and keep customers. The marketing campaign should cover this in detail. You need to convince your target customers that you have the best product or service for them at the best possible price.
This is where a comprehensive marketing plan comes into play. This plan will help to identify the needs and wants of your target customers, determine the demand for your product or service, identify competitors and analyze your company’s advantage, and identify future product/service areas for growth. It may even show you new potential customers and help in the design of your product or service.
5. Keep financials realistic.
Costs and revenue projections are the heart of your business plan. Your financial projections determine if your plan is viable and can attract investors. But while entrepreneurs are usually optimistic by nature, this is the place for straight-out realism.
“Too often, entrepreneurs go to extremes with their numbers. In some cases, they don’t do enough work on their financials and rely on figures that are so skimpy or overoptimistic that anyone who has read more than a dozen business plans quickly sees through them.” Business gurus Stanley R. Rich and David E. Gumpert wrote this 35 years ago for the Harvard Business Review and it is just as true today as it will be 100 years in the future.
An accurate revenue projection will keep your company from overstaffing or purchasing unnecessary assets. Comparing your projected revenue to similar companies on the Securities and Exchange Commission website may help you to determine your revenue range.
Cost projections typically include employee costs, marketing expenses, legal, IT and any other potential expenses, such as office rent, software licensing, supplies, and credit card fees. Here again, researching costs and expenditures at similar companies will help keep your own projections realistic.
At the end of the process, you’ll have answered questions that you didn’t think to even ask at the start. If you are looking for more support or guidance as you build your company and launch into your future success, our Boost Midwest team is here to help and don’t forget to sign-up for our newsletter for the latest tips & tricks that our clients are using to build their successes as well.