Writing a small business plan is your road map to entrepreneurial success. Think about it. We plan all our major life events: vacations, weddings, buying a house, retirement – even what will happen to our assets when we die. We plan so we and others working with us understand what we want to accomplish and have an idea of how we’ll go about accomplishing it. Why should your business be any different?
Unless you plan to seek funding from a bank, you probably don’t need a formal business plan. You do, however, still need to define goals and purpose for your business, understand your customers, competitors and the market, devise an action plan to help you achieve your goals, and think through what could go wrong and if so, how you’d handle it.
The best small business plans are concise and focus on how your business is operating today, rather than speculating on all the things your business could possibly be. You can write one by tackling these subjects:
Step 1 – What Is Your Business?
- Your mission and purpose: Why are you in business? What is your business mission and purpose?
- Your business goals for this year: What are your business goals? What do you want to accomplish in the next year?
- What you sell: What products and services do you sell? What is it that you do, specifically, that provides enough value that people will pay for your products and services?
- Who you serve: What types of customers and clients do you serve? Where can you find them? What is their biggest pain or problem that your product or service solves for them? How does your product or service enrich the lives of your customers and clients?
- Who your competitors are: Who else serves your customers? What are their strengths and weaknesses? What are they doing to attract customers? How is their product or service better than yours? How is it worse than yours?
- Why you are unique: What are your strengths and weaknesses? What do you do better than your competitors? Why should customers buy from you rather than all the other choices they have? How do you explain what it is you do to your prospects?<
This section isn’t about jargon or philosophy. It’s about explaining in layman’s terms the core principles of your business and where you want to be within a specific time frame.
Step 2 – Where Is Your Business Today?
Even if you are just starting out, you most likely have some starting resources and talents to work from. Perhaps you already have a home office, computer, phone and plenty of time to jump in. Perhaps you have investors who will fund your business. Perhaps you have 15 years of experience in a particular industry. Perhaps you’ve created a unique process that solves a specific problem for a type of business. Write these down.
- Strengths and Talents: What areas and industries do you have years of experience in? What are your strengths? What do you love to do? What problems can you solve?
- Resources: What resources do you currently have (money, time, employees, vendors, technology, people in your network, your strengths and talents, opportunities, threats facing your business)?
- Uniqueness: Why would clients choose your products and services over your competitors’?
- Income: How do you currently make money? Which products and services do you sell the most of? Why – what problems do they solve? Can you find other products and services that may complement these and that you can also sell to your customers and clients?
- Marketing: How do you market your products and service to attract new clients? Who do you know that might need your products or services? What organizations do you belong to where you might meet people who need your products and services?
Be as realistic as you can when writing this section because this will become your starting point and provide the benchmark for how you can measure your goals.
Step 3 – How Will You Manage Cash Flow?
Your finances don’t have to be scary. They just have to portray an accurate picture of your business, detailing your expenses and how you plan to make money. How do you do that? Sit down and make a list of all the costs involved in running your business including rent, office supplies, marketing and advertising, insurance, membership dues, training, and the like.
Income – Now, figure out how you can make that sum each month, given what you are currently offering. Make a list of each product or service you sell and how much you charge.
For instance, if your average profit per sale is $50 and your total expenses are $6000, then you must sell 120 per month. If there are about 20 working days in a month, that means you must sell 6 products per day.
If your average profit per sale is $1000 and you want to make $6000, then you only need to sell 6 per month, or one every 3-4 days.
Bookkeeping and Taxes – Keeping your financial resources in check is the key to running a successful business. We often don’t realize just how much we spend until we look at our bank account and wonder where the money went. When you monitor your process daily or weekly, you can see exactly where you are in relation to your goals.
I strongly encourage you to buy business accounting software like Quicken Home and Business or QuickBooks so you can keep track of your income and expenses on a regular basis. Both software packages link into your bank and credit card accounts so you can quickly download your expenses directly into the software. They also provide you with numerous financial reports.
Keep in mind, the best business plans are those that provide a model for successfully running your business. If it can help you get funding or explain to others what you do, that’s great too, but those are secondary benefits.
Step 4 – Moving From Where You Are To Where You Want To Be
Now that you’ve documented where you are and where you want to be, where are the gaps? If you’re just starting out, the gaps probably look massive, but don’t get overwhelmed. This exercise is about chunking tasks into bite-sized pieces you can easily do and giving yourself a time frame and deadline by which you’ll complete each task.
In step 3, you wrote down all your monthly expenses. This will serve as your break-even point – in other words, this is what you need to meet your basic requirements for living without incurring debt. In this step, you’ll start with whatever that number is and work backwards.
If your goal is to make $6000 monthly and you are selling a $1000 service, that means you need 6 paying clients per month. Where might you find these clients? (It helps if you know what types of clients you are looking for. Who would have the biggest need for your service? What types of people would find it the most valuable?)
Let’s say that for every four people who inquire about your services, one buys from you. That means you need to talk with at least 24 prospects (6 paying clients x 4 appointments each) per month. How are you going to get those appointments?
- Perhaps you’ll get a few from referrals – what can you do for your best referral partners and past clients so they’ll want to refer business to you?
- Perhaps you’ll get a few from advertising – where should you advertise and what should you say?
- Perhaps you’ll get a few from mailings – who should you mail to and what should the offer be?
That’s how you create your action plan.
Step 5 – Define your biggest problems and obstacles.
You now know where you are, where you want to be and what to do to get there. Now, ask yourself – what might hold you back or prevent you from being successful? Make a list of all the things holding you back such as:
- No one knows who I am, nor do they consider me an expert.
- There are lots of competitors in my market space.
- My prospects can’t see any difference between my company and my competitors’.
- I don’t have a list of prospects or keep a contact database to market to on a consistent basis.
- I don’t get any response from my ads or mailings.
- I don’t have a system in place for nurturing leads.
- I don’t have a process in place for asking for referrals.
If lack of knowledge or one of your weaknesses is holding you back, write it down. It’s better to acknowledge it and find ways to work around those issues rather than ignoring them and hoping they will go away.
Step 6 – What are potential solutions?
For each problem you identify, come up with potential solutions. For instance, if your ads or mailings aren’t working, decide you’ll learn more about direct marketing and that you’ll test different ads and offers in different newspapers, publications and mailings until you do find something that works.
If you don’t have a process in place for asking for referrals, how can you create one? Here’s a sample process: Once you complete a project with a new client, send them a thank you card with a request for a referral. Follow up with a call each month for the first three months to check in on them and see if they’re having any problems you can help with. Invite them to client appreciation events. Send them a monthly newsletter about things that would be of interest to them.
What if your lack of knowledge is holding you back? There’s no shame in that – very few entrepreneurs know everything before they get into business. What hurts businesses is when they ignore their weaknesses and hope they’ll go away. In fact, SCORE & U.S. Bank found that “in 70 percent of small-business failures, a key factor was the owner not recognizing or ignoring weaknesses, and then not seeking help.”
The moral is that it’s OK to ask for help. There are plenty of great marketing experts, coaches and mentors, and organizations like the Small Business Administration or Chamber of Commerce groups that can help.
Step 7 – Prioritize.
You can’t tackle all your obstacles at once, nor will you ever know “everything” about business. You will always be learning how to do things faster, better, and cheaper but until you start working through your obstacles, you will never be able to test, get feedback and make changes.
As you prioritize, look at which obstacles must you overcome first so that you can solve other obstacles. For instance, if you aren’t getting responses from your ads or mailings, then you probably will have a difficult time creating a list of prospects in your contact database. Work on learning more about how to improve your advertising first.
Step 8 – Commit to action.
Planning helps you see what you need to do so you don’t become overwhelmed and frustrated, but action is what gets you to where you want to be. Commit to an action that will take you closer to your goals each day.
By following these 8 simple steps, you can start writing a small business plan today.