Our culture is full of success stories of businesses that seem to start spontaneously in someone’s garage or a college dorm. We are drawn to this narrative of genius ideas and bursts of inspiration because it’s a more appealing story than someone who lays down the groundworks with a solid plan.
While we all want to believe that having that one great idea will lead to a great business, the reality is that most people need some kind of a business plan in order to test out ideas and execute them successfully. No small business can sustain itself for long without covering the basics.
Think of a business plan as a tool that can help you straighten out your thoughts and priorities. First and foremost, it’s a document written for you and your company. The process of writing the plan can guide you to think about areas of the business you may not even have considered. In doing so, you’ll be able to get an even clearer vision of your company, understand what’s practical and what’s idealistic, and set you on a path toward starting a sustainable business.
The Small Business Administration (SBA) separates business plans into two broad categories: traditional vs lean startup.
We’ve developed our own approach that combines the best elements of both the above––the Startups Made Simple Business Plan.
The truth is, most startups and small businesses don’t need an exhaustive, detailed business plan. When you’re starting out, time is of the utmost essence. The last thing you want is to spend hours polishing a pristine document that at the end of the day will only remain a document.
Small businesses require a lot of flexibility and testing, especially during the early stages when you’re just starting out. That’s why the Startups Made Simple Business Plan focuses on getting your ideas out quickly so that you can test them and make adjustments based on your learnings.
The idea is to quickly go through your ideas to see which ones are really worth testing––you don’t want to waste time testing something out and spending valuable resources when a simple plan would’ve shown you it wouldn’t be practical––then execute quickly, learn fast, and improve fast. We do this because, at the end of the day, small businesses need speedy execution to grow. Planning alone won’t cut it by any means.
So below is a checklist of the essential items your business plan should contain.
Let’s dive into some of the key points on this list.
If you can’t quickly and concisely explain what your company does, it might be a sign that you need to work on your idea. Just as movies and TV shows have loglines to hook viewers into their contents, your vision of the company should be a quick summary that lets the reader know what’s at the core of your idea.
Tip: Don’t worry if you can’t come up with a clean elevator pitch from the start. It’s normal for your company description to be messy and long in the beginning, but through the process of refining your vision, you’ll gain a better understanding of your ideas and narrow down the complexities into a clear, easily understandable idea.
Product-market fit (PMF) is one of the biggest reasons businesses fail. You may have a great product but if no one wants them––for reasons ranging from a too small market to unrealistic prices––you don’t have a business. This is why any business plan should specify the audience you’re trying to reach with your product.
Thinking about who your product is for and why and how it would benefit them can help clarify your company goals. Defining your target market is one of the most important things you can do in advance to avoid troubles down the road. Other details might be easier to swing or modify as you go, but skipping on product-market fit can have disastrous consequences for businesses unprepared to meet the reality of the market.
Tip: Sometimes you can’t know whether you have the right PMF until you go out and test. Whether through building prototypes, sharing your products for free, or surveying different types of potential customers, have a game plan for how you can test out your target market in advance.
Even if you’re not writing up a detailed business plan for an investor, thinking about the cash flow and funding of the company will help you prepare for the more practical side of the business. After all, ideas and visions are great, but without the money, it’ll be harder to execute them.
Here are some questions you can ask to think about this area:
Tip: Businesses often incur expenses that are easily overlooked. To avoid the problem of tacking on unforeseen expenses on your bill, do a quick, calculation of your current expenses (bills, rent, food, office, contractors, suppliers, etc.) to find out how much cash you’ll need to keep the business running. This will also help you set a more realistic price for your product and can potentially help you cut down unnecessary expenses to keep things lean at the start.
In the eagerness to start a business, certain long-term items can easily be overlooked. That’s why it’s important to remember to include them in your business plan. Whether this is the time it might take to manufacture your product, or a long-term lease on your office or warehouse space, thinking realistically about this in advance can save you a lot of headache down the road.
Tip: Give yourself ample buffer for the items on this list. We have a tendency to overestimate our abilities to get things done and underestimate processes that often turn out more costly and time-consuming than we expect. Businesses are always prone to unforeseen expenses such as a supplier running out of materials, weather affecting a delivery, or a machine breakdown that delays production. Especially when starting out, we may not consider these items and get blindsided when they happen.
The Startups Made Simple Business Plan is not a perfectly polished piece of document. Rather, it’s a tool that can help small businesses launch their ideas in a realistic but efficient way, allowing for plenty of testing and mistakes along the process.
Share your business plan with colleagues, customers, or whoever you want feedback from. Show them your mockups or prototypes if you can. Use survey tools to reach more people. When you find that something doesn’t work, go back and modify your strategy and plan. Then repeat this process over and over until you’re confident you have a solid, viable product that’s ready for a market debut.
Most of all, don’t be discouraged by negative feedback or ideas that don’t work out. This is all a natural part of the process––one mistake means one step closer to success. Always have a backup plan so that you don’t bank all your cash and resources into a single idea. At this stage, it’s more important to try out your ideas and see which ones will stick rather than betting only on one horse that you’re not yet familiar with.
This entry was posted on Friday, September 6th, 2019 at 12:20 pm and is filed under Starting A Business, New Business Ideas. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.