Why would you want to write a basic business plan as opposed to a more elaborate one? Most business owners I know struggle with the idea of writing a full-blown plan for their business. To be completely honest, writing a plan for anything, let alone a business you own or intend to start, is challenging because…
1. we don’t know where or how to start
2. we want our plan to be perfect the first time we write it – as in, we don’t want to make any mistakes
3. we don’t like to write – and let’s face it, writing a plan involves writing.
I’m going to share with you ways to overcome each of these hurdles. But before you do anything, allow yourself to break the process of business planning into small steps.
The first step is to have a basic plan which will serve as the foundation for a more detailed and comprehensive plan down the road.
How to Start Writing Your Plan
What goes into a basic plan? Well, let’s first define a basic plan as a plan for the bigger plan you will arrive at later on.
Here are the essential questions you need to answer:
1. What do you want to gain by writing this plan?
Is this plan an internal plan which you will use to guide yourself or your team towards achieving specific and measurable targets? Or are you aiming to attract potential investors? Is this something you would like to take to the bank to propose a loan for your business?
Begin by examining what your specific goal is for writing your plan.
2. Who is going to review my plan, and what do you want them to do with it?
You need to identify who is going to actually study your plan, and what they are going to do with it. If it’s yourself, then it’s a little easier to answer this question because the answer lies within you.
If, however, you are writing your plan for others to review, and assuming you’ve answered #1 above, you’re going to have to do some background analysis.
Start listing names or titles/positions of people who you expect to review your plan. Then, for each person, brainstorm how you want that person to react to your business plan – what they should do with it.
You could do the same thing for investors – do you know any business owners? Ask them what they would look for in any business venture they would invest, and specifically what they would look for if you wanted them to invest in your business.
3. What is the core product or service your business offers to buyers?
To answer this, write down the product or service you intend to offer as simply as possible. We’ll answer more detailed info about it in the following questions.
4. Who is the ideal customer for this product or service?
Really, ideas for business are a dime a dozen. You often hear people talk about a great business idea they have, but they rarely back it up with any kind of proof that a customer exists for such a product or service, and that that customer would be willing to pay.
Try to be specific in profiling your buyer. For example, does your product or service cater to men or women, or both? What age groups or income levels does it service/attract? Are there any geographical areas that your product or service would supply?
5. Is there enough demand for your product or service?
This is something you’ll want to investigate in more detail as you develop your business plan. At this point though, what’s important is to do some preliminary research. Searches on Google, Hoovers or Bizminer will help you study a particular industry, and you can often drill down your research to a particular state or city. Your search at Google is of course, free, but you’ll often find for a small investment at sites such as Hoovers or Bizminer, you’ll get meaningful data for your market vertical, which you can start analyzing right away.
It’s also not a bad idea to survey buyers on their purchase behaviors and perceptions towards your product or service. Arranging a questionnaire or focus group can give you some useful insight into how potential buyers react to your product or service.
If it’s reasonable, consider giving away product or service trials and then follow-up to evaluate user expectations and experiences.
If you don’t have demand for your product or service, it really doesn’t matter how great it is anyways, right?
6. What existing problems or needs does your product or service solve for your customers?
This is one of the most important questions to answer, because ultimately, your product or service is just another one available unless it clearly and uniquely solves a problem or need which buyers face.
To give an example, let’s say your product is a software application that helps you manage your finances and taxes. There are a few applications in the market which do that already. So, what does your application do that others don’t? Is it better on features, is it faster? Is it more secure? Is it more user-friendly? Is it more portable? Does it really help someone save money or increase their net worth?
Can you see why getting clear on the solution you offer to your target market is so crucial?
7. Who are your direct and indirect competitors?
You really should gain at least an initial understanding of who else is offering similar products or services to your target market. It’s good to know how their products or services are currently used and perceived – why people buy them, and why they don’t. In doing so, you begin to understand the strengths and weaknesses of your competitors from the consumer’s perspective.
Depending on what your product or service is, you can find all kinds of information about user experiences with your competitors’ offerings. Sites like Amazon let you see product reviews by customers who bought products.
8. What do you need to get your business rolling/growing, and what will it cost?
This is arguably the most painful part of business planning. Yet, what is the point of having a plan if you don’t know how it all adds up financially? You may not know how to put all the numbers together on your own. If that’s the case, invite or even hire someone to help you sort out the numbers.
Aside from any potential revenues earned from sales of your product or service, you’ll need to know your fixed expenses – what it costs you to run your business whether or not you sell a single item, and your variable expenses – what it costs you for each item sold.
Naturally, in the early stages of planning a business, you will be doing a lot of forecasting, and your numbers may not be as accurate as you’d like them to be. So, you’ll want to be as conservative as possible about how much revenue you’ll generate and how much your business will cost to run.
9. Putting your plan to action – what are the key steps you need to take?
At some point, the plan needs to hit the road! The plan is no good if it doesn’t help you take action. So a simple action plan should be included – what needs to be started and completed, when and who will do it, all need to be mapped out at least at a basic level.
Having an action plan will also help you get excited about your business venture, as you can see how it comes to life.
10. How can you improve your plan?
Once you’ve answered these questions, you have a basic blueprint of how your business is going to look at the early stage.
Remember, your first step is to prepare a basic business plan that serves as a foundation. From this foundation, you will want to further explore areas which need more analysis and testing, while some aspects of your business venture merely require you to get started and measure how things are going.