Building Blocks of a GREAT Business Plan
Working on a business plan can be an intimidating thing the first time. To many, it feels like an obstacle in the way of getting straight to business, literally. It’s tempting to skip it when you hear a lot of entrepreneurs brag about not having business plans. Before you brush past it, know that these same entrepreneurs actually do have plans; they just didn’t put them into a document. They all have an understanding of their businesses. They have plans and expectations for their businesses. Some are better than others, but they all have plans nonetheless.
Business plans come in different forms, shapes and sizes. To demystify the business plan, here are the three key ingredients of every good business plan:
This is where you make sense of your Market, Industry, and Competitors. By the way, many people confuse the market with the industry. Think of it this way: having a sandwich shop on a university campus means you are in the restaurant business (industry) and your customers (market) are primarily students.
Understanding your customers is perhaps the most important part of your plan. The more you know about them, the better you will be able to deliver something that solves their problem and makes their lives better. That’s why many entrepreneurs were on the customer side before they started-up their businesses.
Perhaps the most important part of the plan is understanding your customers. Find out everything about them (who are they, how many of them is there, where they are, what they need, etc).
Note: I will discuss in another post how entrepreneurs today can understand their markets faster than was possible before.
For your industry, you need to know what it takes to work in your industry (key suppliers, technology, regulations, etc)
Of course, you also need to know what your competitors are doing (their prices, strengths, weaknesses, etc.)
Do your homework here and you will do well.
This is where you lay out how you will run your business based on what you know about your customers, industry, and competitors. You will decide on sales and marketing (what you will sell, for how much, how you will promote it, and how you will distribute it), operations (what needs to get done), people (who will do what), and financing (how will finance and how much). These plans have to fit well with your analysis. So for example, when your customers are students, your prices have to fit their budgets.
This is where you show and forecast results of the business based on your analysis and decisions. Your results will be financial (income statement, cash flow, balance sheet) and nonfinancial (number of customers, average spend per customer, repeat customers, customer defects, etc).
It is VERY important to list your assumptions when you get to this part. You will be surprised how many assumptions you will have in your projections (e.g. how many customers you will have over time). As you get traction and feedback with your customers, you will validate and update these assumptions.
The rest of the business plan works around these three building blocks. The other sections will include your executive summary, business description, risk analysis, appendices, etc. Start with a good base, and the rest will fit in nicely.
In a way, you can think of your business plan as a sandwich. Your analysis and actions are your bread while your results is the meat (or falafels for vegetarians).
Do you know anyone who can use help in doing a business p;an? go ahead and share this article with them.
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