Eight Steps To A Great Business Plan
Start-up entrepreneurs often have difficulty writing out business plans. This discipline is going to help you in many ways so don’t skip this planning tool! To make it easier, here are eight steps that will produce a worthwhile plan:
- Set time aside to prepare your business plan as you work through the MOBI courses.
- Focus and refine your concept based on the information you have collected.
- Gather all the data you can on the feasibility and the specifics of your business concept.
- Outline the specifics of your business, using a “what, where, why, how” approach.
- Include your experience, education and personal information.
- Fill in the templates at the end of each session. Use clear language and realistic projections.
- You may wish to enhance your presentation with bar charts, pie charts and graphics.
- Share a draft of your plan with trusted advisers. Use their feedback to improve the plan.
Does Your Plan Include the Following Necessary Factors
A Sound Business Concept: The single most common mistake made by entrepreneurs is not selecting the right business initially. The best way to learn about your prospective business is to work for someone else in that business before beginning your own. There can be a huge gap between your concept of a fine business and reality.
Understanding of Your Market: A good way to test your understanding is to test market your product or service before your start. Do you think you have a great kite that will capture the imagination of kite fliers throughout the world? Then craft some kites and try selling them first.
A Healthy, Growing and Stable Industry: Remember that some of the great inventions of all time, like airplanes and cars, did not result in economic benefit for many of those who tried to exploit these great advances. For example, the cumulative earnings of all airlines since Wilber Wright flew that first plane are less than zero. Success comes to those who find businesses with great economics and not necessarily great inventions or advances to mankind.
Capable Management: Look for people you like and admire, who have good ethical values, have complementary skills and are smarter than you. Plan to hire people who have the skills that you lack. Define your unique ability and seek out others who turn your weaknesses into strengths.
Able Financial Control: You will learn later the importance of becoming qualified in accounting, computer software and cash flow management. Most entrepreneurs do not come from accounting backgrounds and must go back to school to learn these skills. Would you bet your savings in a game where you don’t know how to keep score? People mistakenly do it in business all the time.
Financial Management Skills: Build a qualified team to evaluate the best options for utilizing retained earnings.
A Consistent Business Focus: As a rule, people who specialize in a product or service will do better than people who do not specialize. Focus your efforts on something that you can do so well that you will not be competing solely on the basis of price.
A Mindset to Anticipate Change: Don’t commit yourself too early. Your first plan should be written in pencil, not in ink. Keep a fluid mindset and be aggressive in making revisions as warranted by changing circumstances and expanding knowledge.
Formulate (and Reformulate) Your Business Plan
Donald N. Sull, associate professor of management practice at the London Business School, in an article in the MIT Sloan Management Review, offers some practical suggestions for managing inevitable risks while pursuing opportunities. Here is a capsulation of his suggestions on how to formulate (and reformulate) your business plan:
- Be flexible early in the process and keep it fluid. Don’t commit too early. Expect your first plan to be provisional and subject to revision.
- Ask yourself if your experience or expertise gives you the right to an opinion on your specific opportunity.
- Identify your potential deal killers: variables that are likely to prove fatal to the venture.
- Clearly identify what you see as the key drivers of success. What are you betting on here?
- Raise only the amount of money required to finance the next experiment or evaluation you envision, with a cushion for contingencies.
- Delay hiring key managers until initial rounds of experimentation have produced a stable business model.
- At some point, take the plunge and test your product or service on a small scale in the real world through customer research, test marketing, or prototypes.
- Test and refine your business model before expanding your operations.
Top Ten Do’s and Don’ts
THE TOP TEN DO’S
- Prepare a complete business plan for any business you are considering.
- Use the business plan templates furnished in each session.
- Complete sections of your business plan as you proceed through the course.
- Research (use search engines) to find business plans that are available on the Internet.
- Package your business plan in an attractive kit as a selling tool.
- Submit your business plan to experts in your intended business for their advice.
- Spell out your strategies on how you intend to handle adversities.
- Spell out the strengths and weaknesses of your management team.
- Include a monthly one-year cash flow projection.
- Freely and frequently modify your business plans to account for changing conditions.
THE TOP TEN DON’TS
- Be optimistic (on the high side) in estimating future sales.
- Be optimistic (on the low side) in estimating future costs.
- Disregard or discount weaknesses in your plan. Spell them out.
- Stress long-term projections. Better to focus on projections for your first year.
- Depend entirely on the uniqueness of your business or the success of an invention.
- Project yourself as someone you’re not. Be brutally realistic.
- Be everything to everybody. Highly focused specialists usually do best.
- Proceed without adequate financial and accounting know-how.
- Base your business plan on a wonderful concept. Test it first.
- Pursue a business not substantiated by your business plan analysis.
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