They’re a necessity… But there’s a twist.
Knowing how much money you have and how much you’re going to need to start and maintain your business. Knowing who your target audience is and how you plan to reach them with marketing. Knowing how you plan to grow, how you plan to staff, how you plan to pay that staff and how you plan to manage your business during a crisis. These are all things that you probably know, as an entrepreneur, but having them in your head doesn’t help you to effectively #createyourowneconomy.
The argument has been made that in this day and age of rapid growth startups, a business plan is basically obsolete before you’ve finished writing it, that it sets up too many restrictions on the direction you take with your business, but I have to disagree with this view. Too many businesses are built on a wing and a prayer, without thought to the downstream effects. Success or failure for many of these businesses comes down to luck rather than strategy and that seems a poor basis for long term growth to me.
Writing down your strategy doesn’t confine you to that route but it puts all your plans in context and makes it easier to get the perspectives of others, including mentors. Like it or not, most investors will want to see some form of a business plan, since looking into your head isn’t really an option. A presentation à la Dragon’s Den isn’t how you’ll end up attracting interest in your business.
So while the notion of a business plan may seem, on the surface, a static, stodgy old school tool, if executed in modern fashion, it’s not.
What do I mean by ‘modern fashion’ business planning?
Don’t get hung up in the ‘how’ of writing it: you’re not going to win prizes for style, unless this activity is part of your MBA program. Instead, look at a plan as a fluid document, a representation of your business strategy and how you will get from your original thoughts to the final goals, an actionable view of what you’re going to accomplish today, tomorrow and in the next five years. Rather than a historical document of the business model, a modern plan will be a work in progress: something that forces you to deliver on action items in order to move it forward.
Don’t forget also to think about quality over quantity. You need to get down some plans for real action items, but you don’t need to graph your projected earnings for the next twenty years. In all likelihood, your numbers would be as much a guess as anything else anyway. Don’t waste your time.
What’s IS essential in any business plan that will work for you?
- Be clear about your vision. Write it down. Not how you’re going to get there; that comes later. For now, you’re looking at the end goal in your mind. What does it look like?
- Before you move forward with your idea, you need to be sure that your model makes sense, that it’s scalable, that it is a business that can grow.
Build a business model canvas — this is an invaluable tool to help you to design your business, innovate your ideas and, if necessary, change direction with your business model, quickly and easily. It gives you an essential view of parts of your business including:
- Revenue streams – How will you earn money?
- Customer groups – Who are we looking to buy from us?
- Resources / partners – Who do we need to help us make this work?
- Key activities – What is important to do right away?
- Value propositions – Why should those Customer Groups even buy from us? What makes us special?
- Create action items that will take you from your present to the future that you envisioned in step 1. Each one has to be focused so that you stay on task, instead of wandering off into la la land. Imagination is a great thing, and you need to take the time to think outside the box, but at some point, you have to get down to the business at hand in order to move forward. The action items will help you to remain focused and as they are completed, your fluid document is altered.
Why is it necessary to do future planning?
It might seem a step too far to be planning five years into the future, but the reality is that decisions you make today can affect the outcome, years down the line. Scalability of resources or machinery, for example. If you don’t think about where you want to be in the future, you will make short term decisions now that could end up costing you more in the long run. Just look at politics to get a sense of what I mean: politicians, who are elected to relatively short terms, are looking to make an impact now. Few look to how things should be in ten or twenty years. The decisions they make often reflect that view.
Future planning isn’t about guessing at the projected revenues. It’s about having the end goal in mind so that the decisions you make today will still make sense tomorrow. Mentors are a great way to find out if your idea has merit so get working on your plan and we can help you with the rest.