Every business starts with an idea and… a well-thought out plan. Okay, that second point isn’t always followed. Many entrepreneurs make do without a roadmap and fly by the seat of their pants. Did they successfully grow in their second year? Honestly, most of them didn’t.
Creating a business plan can be tedious and unexciting. A lot of people hate research and crunching numbers. If you’re used to making off-the-cuff decisions, it might seem unnecessary.
But the truth is, if you get by without one, you might break even on your first year. Think of a plan as the future dreams of yourself and your business. Who doesn’t like to dream? A plan puts that dream into concrete action!
Opening an online shop is not as easy as putting up a “We’re Open” sign on a brick and mortar store. There are no passers-by you can wave at and invite to look at your wares. You need to do market research to know who your customer is, where you will spend your advertising dollars, and how to rank in the search engines.
The challenges you face are daunting, but definitely not insurmountable. A business plan will not guarantee success. It does, however, greatly improve your chances.
Why do you need a plan?
- A business plan is often confused with a marketing plan. The former covers your overall strategy of increasing revenue, savings, employee retention and operational efficiency. The latter is focused on sales and servicing. Successful businesses have both.
- It defines who you are and how you want your customers to see you. Your product may not reflect your brand’s identity. It’s better to launch a new unrelated item under a new brand. Disney created Touchstone Pictures to serve a different market.
- It’s a prerequisite for your marketing plan. Understandably, there has always been an emphasis on marketing because it generates revenue. But, this is only one aspect of a business. You need to know how you are going to market your business.
- Times have changed. Your strengths might no longer be enough for new challenges. You might have weaknesses that didn’t exist before. An inability to quickly adapt to recent trends and technologies can be one. A plan helps you identify areas of your business that need improvement.
- A plan keeps you consistent and focused on what you want to achieve in the near or far future. Without goals on paper, you can easily be sidetracked. This is especially true if you are a work-from-home internet business; you can easily fall for “shiny object syndrome“, where you completely switch your business to the best “new” thing. This results in constantly starting over and making no progress.
- A business plan gives you a reality check with market research. It keeps your feet on the ground while you aim for the stars. Just because others are successful doesn’t mean you’ll succeed too. Remember Google Plus, which attempted to challenge Facebook. It was discontinued in 2019.
- Many businesses believe they have an instant hit in their hands. It’s easy to be swept away by excitement. With enough research and planning, you have a clearer picture of your product’s true potential in a very competitive environment.
- Lastly, a business plan is a requirement for small-business loan applications. You might need additional funds now or in the future.
Writing Your Business Plan
There are many templates on the internet. These can serve as your guide. It doesn’t have to be several pages long. In fact, a one-page plan can be as effective. When you create your own, make sure you include these steps:
1. Define your goals.
List whatever comes to mind and edit later. Your goals can be ambitious yet attainable. Your timetable should be reasonable. Remember, Rome wasn’t built in a day.
You can’t develop your marketing strategies, allocate the right resources and hire the needed personnel without goals. These serve as your compass. But, always allow for adjustments. Circumstances beyond your control, like Covid 19, can affect your business.
Here are examples of goals:
- Gain 5% market share by the year’s end.
- Increase customer retention by 10%.
- Develop a fully-operational website, FB and IG accounts by the first month’s end.
- Complete staffing needs by the end of the first quarter.
2. What do you offer?
What competitive advantage does your product or service offer? This is your main selling point. Many products are similar to each other, but a unique feature can make yours stand out. For instance, I use a shampoo bar that’s made of natural ingredients. Its main appeal, however, is that it doesn’t cause hair loss.
Be honest with your description. This will serve as your basis when you write content about your product. Avoid vague and common phrases like “excellent quality.” Focus on the benefits to your customers. Ask yourself how you can make their lives better.
Are you manufacturing, wholesaling or dropshipping your products? Will you keep inventory or employ third-party fulfillment? All of these should be detailed in your business plan.
3. Know your target audience.
Picture in your mind your customers. Do they belong to a particular niche? List down their demographics and psychographics. This requires a lot of research, but it is essential. We have an article on researching your customer here. Knowing the traits of your target audience tells you where to focus your efforts.
If you don’t have relevant data from past experience, there’s no harm in approximating your target audience’s size. Toothpaste companies estimate their revenue because practically everyone 5-years old and above is a potential customer. Here’s my tip – research your competitors. You’ll get a better grasp of your audience’s size.
4. Identify your marketing channels.
People still look at their e-mails. Aside from this, what social media or messaging apps does your audience use? FB Messenger and WhatsApp may be the most popular among them. Should your product be listed on Amazon? Wayfair?
Also, see our article on conversational eCommerce. You might find ideas that are relevant to your business.
5. Point out your direct and indirect competitors.
Think about businesses that offer the same product type or service. What can you do to differentiate yourself from them? Why would they buy your product instead?
Think about your indirect competitors as well. Can you partner with them in the future? Can your product and their product be complimentary for a customer? Or can customers use their alternatives over yours? If so, how does yours benefit them better?
6. Project your costs.
Your budget will be part of your business plan, and you should develop several options. An ideal scenario might require more funds but could necessitate the taking out a loan. Plan B could mean forgoing paid ads but working within your available resources.
Expenses should be itemized. You can quickly check online the costs of practically everything. One thing I’ve learned in budgeting is to overestimate expenditures by 10%. It might depend on the industry you belong to.
Here are some other points you can consider in your business plan:
- If you’re making your own products, what would be the right volume of raw materials you should store?
- Do you need a larger office or can you delegate tasks to people working at home? Is warehousing necessary or is dropshipping better? Renting less space can save you a lot of money.
- Will outsourcing be a wise option? Let go of tasks such as accounting so you can focus on selling. Marketing functions can also be delegated to chatbots.
- What office equipment is necessary? Buy the best for your needs. I’ve noticed computer companies heavily promoting gaming PCs and gadgets that the average person doesn’t need. Be judicious in buying hardware you will use.
- Should you budget for online ads or micro-influencers? Your market research will tell you which way you should go.
Again, use your competitors’ data as a starting point. You’ll find tons of information, including years worth of statistics.
What are the qualities of an excellent plan?
- Specific. Your goals, objectives, tasks, timeframe and budgets are clear down to the last detail. Even your assumptions are identified as such.
- Measurable. You can track progress at any point in time. Are you achieving a conversion rate of X percent during the first quarter? You can only answer this question if you’ve set a specific target for each quarter.
- Defines duties. Tasks that need to be done to achieve goals are clearly stated. A business plan also includes who is responsible for each job.
- Flexible. An excellent plan lays out the foundation for future opportunities and challenges. Think of it as building a bungalow with allowances for expansion like a second-story.
A plan is also open to adjustments. Businesses should be ready for changes that affect their customers’ priorities and buying behavior.
- Coherent. An excellent plan is easily understood. It’s simple and not open to other interpretations.
- Realistic. Be truthful when you develop your business plan. How can your team commit to it if your goals are whimsical? In fact, involve them when creating your plan. It’s better to be conservative and surpass expectations. An unrealistic plan will only hurt your business.
It will take you days or weeks to write a business plan. Unlike the one you might have written in college, this one will be honest and based on facts. It’s your master plan for growth and the roadmap to success!