Writing a business plan is a key part of setting up any type of business. The act of writing the plan is itself important because it helps to clarify your business vision, see details you've never considered before and optimize your approach to ensure the success of your business. Still there are a few things you should do first before setting out to write it all down. Here are 4 key steps you should take before crafting your business plan.
1. Determine your purpose
What do you want to achieve with your business plan? You're probably looking for funding opportunities, so your business plan will become a tool in meetings with potential investors and stakeholders for showing how your organization plans to make profit. It's important to think abut profit right from the start and a business plan will help you to clarify your revenue strategy.
Before drafting the plan itself, think about your business in more abstract terms. Why does it exist? What are its guiding values? What does it stand for? How will it be represented by its employees? Identifying the core purpose and value of your business, you'll give yourself a compass for decision making at all organizational levels. One way to get all this information is by having a long, honest conversation with your team.
2. Clarify your business model
Before you compile and analyze all the facts and figures that will determine the financial projects you plan to include in your business plan, you should take a moment to test your business model against different potential scenarios. “What if” questions are key at this point. Ask yourself what rates of return you'll get if you sold your product at a specific price point and the client acquisition cost would amount to this much.
Consider as many details as possible – among others, you should think of aspects such as cost of acquisition, hiring, pricing, sales, expenses and growth. Build and test your business model against these considerations and you can be sure to develop a strong factual foundation for your business plan.
3. Identify your target market
Your business plan needs to clearly delineate that group of ideal customers who will be willing to buy your product because it will help them solve a specific problem. Consider your business from their perspective for a moment and ask yourself what makes you special in solving this problem for them. If you can't answer this question, you should reevaluate your target market or your product.
Before targeting your customers, you need to have a clear idea about what they need and how you're going to address this need in your offer. Paint a picture of your ideal customers and you'll see whether the product you offer is really the most attractive alternative your client can choose from. If you're not sure, you should use a different strategy to define your target market and test it against this question until you get it right.
4. Test your idea
Get out there and start talking to people about your idea. Without solid feedback from industry experts, potential clients and other entrepreneurs you won't have the certainty that there's a market for your product. Asking for honest feedback about your product before writing your business plan will help you to clarify your business idea and get a sense of the size of your potential market.
Also, you'll get key insights about your competitors which are essential for accurately positioning yourself on the market. On top of that, conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis of your offer to check what are the potential opportunities and risks you could be facing when conducting your business.
Take these 4 steps before setting out to writing your business plan and you can be sure that whatever you come up with will be firmly grounded in market reality and make a convincing business case.
