Dos and Don’ts of Establishing a Business Plan
Plenty of experts will tell you that a new business without a viable, written business plan is probably doomed to fail.
A detailed business plan is especially essential if you need to seek outside funding, including bank loans or venture capital. Your first essential “sale” may be to a loan officer.
You may or may not have a business degree, which can give you a solid foundation in the basics of sales, marketing, management, economics, finance and accounting. Business schools also are increasingly offering instruction in entrepreneurship, responding to a growing demand from those who aspire to be their own bosses.
But regardless of your degree or lack thereof, you will need a solid business plan to make your venture work. Here are some of the dos and don’ts of establishing a successful business plan.
• Define how your business will meet an unmet need.
It’s vital to identify a need in the market that competitors are not filling. You must define specifically what your company will offer and why this meets an unmet need.
What makes your company unique? What does it have that other companies don’t?
For example, you may want to open a dog-grooming business in an area that already has several. But if the others are all in fixed locations and you plan to work out of a van, grooming dogs at customers’ homes, that could give you the leg up that makes your business succeed.
• Identify exactly who your customers are.
You must research your market until you know everything there is to know about your potential customers. And your target must be specific, not overly broad.
Talk to potential customers, experts in the field, even competitors. Learn who your potential customers are, how they make buying decisions and how you can drive them to your enterprise with the right marketing.
• Perfect your elevator pitch.
If you had a minute or so to explain your business while riding in an elevator with a potential backer, what would you say? Could you explain your business plan in one sentence?
If not, your concept may be too broad, too complicated or not sufficiently defined in your own mind to explain to someone else. Cut the fat, keep the lean and become skilled at briefly articulating your business plan, both verbally and in writing.
• Don’t underestimate your costs or overestimate your revenues.
You will need good estimates of your startup and operating costs, with some padding for unforeseen contingencies. If you underestimate these, it will probably take longer than anticipated to open your doors to customers, and perhaps much longer to reach the break-even point.
You also need a realistic estimate of your revenues, and not a pie-in-the-sky dream of the riches that will be rolling in.
You’ll need plenty of optimism to make any new business succeed, but beware of being too optimistic in forecasting costs or revenues.
• Don’t ignore the competition.
“If you know the enemy and know yourself, you need not fear the result of a hundred battles,” says the Chinese general Sun Tzu in “The Art of War.”
“If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
Learn everything you can about your competition, including where and how they operate, what exactly they offer customers, and especially what they fail to offer. Find a way to fill the gap in what’s available on the market now, and you will have a significant competitive edge.
• Don’t make your plan too broad.
You’d like to think your business can do it all and sell to everybody. But that’s not realistic, and it’s not going to work in a business plan.
Be as specific as possible in identifying the product or service you will offer, and in narrowing down the clientele you will serve.
You may have brainstormed dozens of ideas, but narrow these down by jettisoning those that don’t serve your specific purpose.
Starting a new business is never easy, and neither is drawing up the business plan. But for the business to stand a chance, you have to get the plan right in the first place.