Entrepreneurs start with a dream. Turning it into reality requires a series of concrete, carefully crafted goals.
To advance from an idea to a viable enterprise, you need a roadmap. A business plan provides that direction. It also offers a framework to follow through and a basis for measuring your progress.
Eager to attain your vision, it’s tempting to plunge in without a rigorous plan. But taking a seat-of-your-pants approach adds to the risk. To write a business plan that guides your success:
Keep it simple. Fledgling entrepreneurs may assume a business plan should be a lengthy, data-laden document. But brevity and clarity can work to your advantage.
“Don’t be intimidated,” said Noah Parsons, chief operating officer of Palo Alto Software in Eugene, Ore. “We recommend a lean plan, a one-page outline of your business concept.”
This succinct version starts with a vision statement and pinpoints the problem your business will solve, the potential market for your product or service, competitors and sales goals. Download a free template here.
Think like a customer. Among the key elements of your business plan is defining the problem that you’ll solve. That’s harder than it sounds. You not only need to identify a glaring issue that consumers face but also propose a creative, cost-effective way to address it.
“A lot of entrepreneurs think of the solutions that they’re offering, instead of what problem does my widget solve for my customer,” Parsons said. “You need to get inside the customer’s head and know how you will make customers’ lives better.”
He suggests talking to potential customers, heeding their input and easing into your market. Rather than act on your assumptions, determine if your gut instinct is correct. Contact a sampling of would-be buyers to validate your hunch.
Reduce uncertainties. Some parts of a business plan involve predicting the future. How will competitors react to your pricing strategy? How many people will buy what you sell? To what extent will the cost of equipment or raw materials vary in the coming years?
While it’s impossible to answer these and other questions with certainty, you can build a plan around conservative calculations. Use recent data, demographic trends and purchasing patterns to refine your estimates.
“Setting sales goals may seem like the hardest thing to do because there’s a fear of getting it wrong,” Parsons said. “New entrepreneurs have to be comfortable making their best guess.”
Research what’s next. Once your business is up and running, you’ll begin to gain a clearer understanding of how to advance from startup to second-stage growth. At some point, you may want to draft a more detailed business plan that answers questions that potential investors and future employees will ask. Examples include fleshing out your target market, your sales and marketing strategy, and the evolving structure of your company.
“You’ll want to have a management and operational plan,” said Warren Daniel, regional director of the New Hampshire Small Business Development Center in Dover, N.H. “That changes with the economic cycles. In a growth period, it’s harder to hire” so you’ll need to think through how to recruit staffers in a tight labor market.
Keep updating. Treat your business plan as a work-in-progress. With each passing month, you’ll want to review it and possibly rework it to reflect the myriad challenges that you’ll confront.
“I look at a business plan as a living document,” Daniel said. “As your business grows, it will change.”