Some of the biggest companies in the world have been market leaders for so long that the secrets of their success may seem like a mystery. Dig back through their history, however, and you’ll likely find a detailed outline of their original value proposition, their marketing strategy, their financial model and more. In other words, the most successful companies in the world tend to start with a detailed business plan -- and you should too.
With so many uncertainties in the early days, of course, some entrepreneurs may want to get their feet wet building the business first, and figure out the key elements of their business plan as they go along. That’s a mistake. Just as you’re not likely to attract customers without doing your homework about them beforehand, a business plan ensures you’re ready to deal with the unexpected while executing on your vision.
Don’t be fooled by the seemingly overnight success of some startups. These firms may only employ a couple of founders at first, and they may work in a faster and more agile way than their larger counterparts, but the ones that survive tend to tie back some of their most critical decisions to what was put in their business plan. This could include everything from the way their products and services are positioned in the market to the number of staff and other resources they’ll need. A business plan, in other words, is like a blueprint that can help a startup or small and medium-sized business ensure it will eventually grow to its fullest potential.
Although business plans tend to be scrutinized by banks, venture capitalists and other early investors in a new business, that’s not the only reason to create one. Take a look at some of these other potential use cases as you map out what to include in the one you write.
Whatever the initial spark of inspiration to create and develop a business, entrepreneurs may have only identified part of what the business could do, or the community it could serve. By writing out a business plan, they have what could be considered a “first draft” or prototype of what the final “product” could be.
Even before they use it to pitch for funding, for instance, it’s always a good idea to share your business plan with trusted coworkers, former bosses, smart friends and even family members, especially if they have experience in the sector where you want to launch a firm. Hopefully they see promise in the idea, but they may also spot opportunities you missed.
Most business plans include a “market overview” section that provides a snapshot of who they see as customers and their needs. Some people might look at that and suggest a larger addressable market based on potential customers in different sectors, geographies or demographics than what you had put down.
Others might look at the business plan’s section on products and services and suggest additional features that could differentiate you from more established competitors. Who knows -- they might even have some ideas on whom you could partner with or hire to achieve success even faster.
On the flip side, you may get negative feedback from the business plan in the form of potential pitfalls or hurdles that would need to be overcome. This may not come until you’ve shared the business plan with investors or others who tend to review them on a more regular basis, but you’ll never know if someone can poke holes in an idea until you’ve written it down.
You could also use a business plan as a sort of self-assessment. After drafting it, for example, pretend it was authored by someone else. If this was your first exposure to the idea, what objections might come to your mind? This is a great way of preparing for presentations you might make later on to investors and even your first customers.
No matter whether you do the critique yourself or find the harshest critic you know, your business plan will be a great litmus test of whether your initial idea will take off or not.
There are plenty of books about being an entrepreneur and running a company, but they all have gaps. Some won’t be relevant because the lessons of working in one industry won’t apply to another. Others will be written by people who had better luck, more funding, a better economy and a host of other factors.
No one can really write an owner’s manual for running your business except you. That’s what a business plan really is. Most business plans include a section on operations, which will cover everything from how you’ll manage inventory (if you’re selling physical products) to how you onboard new customers.
Will you have everything covered off in this section? Of course not. Just like those business books, your business plan will have gaps too. But by creating one from the outset, you’ll at least have a framework in place that will make it easier to fill in the gaps based on what you learn on the job. That’s a lot better than completely winging it.
Also like an owner’s manual, the business plan may act as a sort of troubleshooting guide when things go wrong. If you’re not growing as quickly as expected, turn back to the section on your financial model that was shown to the bank or investors. Do you need to update your thinking based on changes or more recent information? On a more positive note, you may find yourself adding customers more quickly than expected. Your operations section may have mapped out a process for incrementally hiring more people -- and it may still make sense. You might just need to get started sooner with bringing on people in some key positions.
A business plan, in other words, does not have to be a static document. Think of it like a muscle -- the more you use it, the stronger you (and your business) will become.