A solid business plan is the foundation of a successful business. It’s the blueprint that shows you where you are going to go and how you’ll get there. Of course, you can change things as you progress and grow, but how well you do at putting together your business plan will play a big role in determining the future of your business.
There are tons of different ways to write a business plan. Most start with some form of an executive summary so that potential investors can get a quick snapshot of your project and what to expect. Then there’s usually a detailed description of the gap in the market, the product or service you will offer, and your plan for making sure your product or service is the one that fills that gap.
Many people want to include lots of numbers and projections into their business plan. The idea is to try and impress potential investors with all the profits you can make them if they give you money to get started. And while this is important, smart investors will be much more concerned with how you’ll make them money rather than how much.Smart investors will be much more concerned with how you’ll make them money rather than how much. Click To Tweet
Here are some tips for writing your business plan that clearly outlines the path to success instead of just promising a potential future.
Fully understand your market
We’ve already mentioned how one of the key components of any business plan is an outline of the current market. You’ll want to emphasize why and where you think there is a gap, and you’ll need to show how your company plans to fill it.
But far too many entrepreneurs don’t get specific enough when they do this. When you look at the tactics that have been successful in generating rapid growth, i.e. growth hacking, you’ll see these companies got way beyond surface level market research.
To give you an example, let’s say you’ve created an app that helps people plan the best tourist walking routes (maybe this already exists, maybe it doesn’t). You combine things such as reviews, top searches for the current city, traffic patterns and personal preferences to create a custom route.
Who is using this product? Too many people will respond saying: tourists, or visitors to a particular city. Sure, this is true, and the goal is to someday be able to reach this entire market, but in the beginning, it’s not nearly specific enough.
A helpful exercise to do is to come up with an “ideal customer.” This asks you to outline the life of someone who would use your product.
You might say your ideal customer is Carol. (Yes, you need to give her a name!) She’s in her 40s, has a good job and two kids, and she travels with her family a few times a year. She’s physically fit, and so is her family. They like to go to new restaurants, but the kids aren’t all that adventurous, so it’s important they find a nice balance. She has an account on most social media platforms but doesn’t really use any of them too much. In general, she still relies on her social circle to recommend products and services she should use.
This is obviously very specific, and it’s true that it only refers to one customer. But by honing in on the specifics of the lives your customers lead, you are helping to identify pain points, as well as some potential touch points for your marketing strategy.
You’ll need to find a way to present this information in your business plan in an easy-to-understand and verifiable way, but demonstrating this level of deep thinking will help outline how you plan to have success, making your business plan stronger and improving your chances of securing funding.
Make SMART goals
Obviously, you need to make intelligent goals, but SMART is actually an acronym to describe goals that are:
Keep these attributes in mind when writing your business plan. Telling your investors they won’t see a profit for five years might be too much, but so will telling them you’re going to rake in seven figures in the first few months.
By coming up with goals that make sense, you are helping to show investors that you have a plan for cascading your business into a success. You’re not trying to hit a home run right away, but are instead concerned with getting things going so that you can have a solid base from which to build your business.
Plan out an exit strategy
It might seem strange to consider an exit strategy when you are just starting out and writing your business plan, but it’s one of the most important steps. Remember who your audience is for this plan: potential investors.
While they might believe wholeheartedly in your project, what they really want is to make some money. You need to provide them with a clear plan for how that is going to happen.
The exit strategy most entrepreneurs choose is to sell their business to a group or individual. You could go for an initial public offering (IPO), but this is kind of like winning the lottery. Remember what we said about SMART goals?
If you’re going to include the exit strategy in your plan, make sure you’ve outlined how you are going to do get to this point. Inform investors how you plan to build value into the company. Placing emphasis on branding and customer loyalty is big for this, and it’s also one of the things you can start doing right away. No matter what you do, be sure to be as specific as possible so that investors can see a clear path from when they give you their money to when they will get it back
Research, research, research
Underlining all of these points is one of the most important aspects of making a solid business plan: research. The more data you can collect about the current market, your potential customers, expenses, projected revenues and so on, the better. Solid research will clearly outline what you plan to do, and it will be much easier for potential investors to see this plan, increasing the likelihood they give you the money you need to make your business a success.
About the author: Jock Purtle is an online business broker. He specializes in the buying/selling and appraisal of online businesses. Throughout his career he has bought, built and sold online businesses, learning lots about what makes a good business plan and what does not. He writes frequently about his experiences to help others have success with their business ambitions. You can find some of his work in publications such as Forbes, CNBC, Entrepreneur and Business Insider.