Business plans are dead.
At least, that’s what we keep hearing from investment gurus, lean start-up enthusiasts and tech mavens who would like to think they’re all action, all the time.
Instead of writing a business plan, we’re now told to create a “business model canvas”. Guess what, folks: that’s the same thing with a different name.
You see, planning isn’t sexy.
That’s why it’s either given a fancy name, or you’re told you don’t need to do it.
But those “experts” are lying when they say business plans are dead.
They tell you instead to create a Minimum Viable Product, to test it on your market, to rebuild, reiterate, and “pivot” until you’ve got something consumers can’t live without. But in order to do any of those things well, you have to plan. You simply have to.
You can cook without a recipe, but you still had to make a grocery list and go buy the ingredients. There is still a plan – just not a conventional one.
You can drive without a destination, but you still have to know how much gas you need to make it to the next station. You still have to plan your travels such that you don’t end up sleeping in your car at the top of a mountain when it’s ten below freezing.
Yes, it’s true that no one wants to read a 50-page tome packed with meaningless charts and a 3-page bibliography. Yes, the expected format of a business plan has changed. That doesn’t mean you shouldn’t create one.
Every single successful company did.
You want to see how well planning works? Well, here are some “shocking” facts.
The University of Tennessee studied many business failures and found that the #1 reason why small businesses failed was “incompetence.” And incompetence means
- Lack of planning (HELLO!)
- Emotional, non-research-based pricing decisions
- Living beyond the means of the business
- Poor record keeping
- Lack of financial knowledge or understanding of conventions (http://isbdc.org/small-business-failure-rates-causes/)
What solves poor pricing? Researching the market and planning out your strategy. What solves living beyond the means of the business? Financial planning and cash flow forecasting. What solves a lack of understanding of the market, finances or anything else to do with the business? That’s right. Planning.
The unsexy, boring stuff.
Except it’s not boring, because if you do it, you increase your chances of success. And if you increase your chances of success, you make more money. And if you make more money, you help more people. And if you help more people, you really get to enjoy everything there is to enjoy about entrepreneurship.
It’s all about planning at the beginning.
So, when “they” tell you to act while everyone else is planning, remember that it’s easy for them to say that, because they did all their planning while you weren’t looking.
Now, let’s assume you’re on board with this whole planning thing.
Call it a business plan, call it a business model canvas, call it a business map, framework or blueprint. A plan is a plan by any other name…so what’s the best way to create yours?
3 Steps to Starting Your Business Plan
You’ve got the great idea and now it’s time to act on it, but you have no clue what order to do things in. There’s no singular way that works for all businesses, but three steps I always start with are:
- Get crystal clear about the problem you solve, and who you solve it for. In other words, what kind of people will see your solution and immediately raise their hands exclaiming, “yes! I need this!”? Write down everything about those people, from their hair color to their personal values. You want to be creating your business plan from that person’s perspective. Everything you do, you do it for them, including the way you plan.
- Figure out how that problem is being solved now. In other words, what solutions are your customers currently using, which are so inadequate? If you’re starting the only mobile hair salon in town then right now, your future customers have to travel to the salon, which might be hard if they struggle with mobility for any reason or don’t have vehicles or have to commute really far. This exercise not only helps you figure out what sets your business apart and makes it unique, but it also helps you identify your current competition. SUPER useful for planning.
- Sketch out a budget. It doesn’t have to be anything fancy, and the numbers can be made up in your head (but it’s better if they are more educated guesses…). But you have to begin somewhere so brainstorm all of the potential costs associated with your startup. Literally, everything you can think of. Now add up the numbers. How does that total feel to you? If it seems totally out of reach, what number feels more comfortable? Over time, as you develop your business plan, you’ll get a lot closer to the actual costs and you can develop a budget that suits your needs.
Once you’ve got these three things accomplished, you’ve already done more planning than most people ever attempt.
And if you want to take it a step further to build your confidence even further and get even more organized, try this free 5-part business plan video course. It’s short and sweet – and guaranteed to move you forward!