By: Dr. Drew Starbird
A woman works at her office desk with a pen, a notebook, and a laptop.
There are many different kinds of a business plans -- from lean, one-page plans that list only the bare essentials to 30-page documents that outline every detail a potential investor would need to know. Some plans are created for internal use only, and include operations procedures and employee responsibilities, and others outline what a company would do if they lost funding or faced other hardships.
To help you write a GREAT business plan, make sure it has these essential components:
A Sound Business Concept
The single most common mistake entrepreneurs make is not choosing the right business to begin with. Starting your own business is a big decision, and is one that should be made carefully. Take your time to think through the details before making a commitment. Consider your budget, the challenges you might face and the long-term economic potential.
It’s also important to keep in mind that operating your own business may be different than you expect. The best way to learn what running your own business would be like is to work for someone else in the same industry. Get as much experience as you can in your prospective business before striking out on your own. There can be a huge gap between what you think your business will be like and what it is really like.
Understanding of Your Market
In order to be successful in any business, you must have a profound and complete understanding of your market. After all, how can you deliver a product or service that people will pay for if you don’t know what they want or need?
Start by researching your market. Who are your competitors? What do they offer? Who are their customers? Where do they spend their time, either online or in person? Start talking with these people, and ask them questions related to your topic. Learn who they are, both in terms of demographics (age, gender, income, etc.) and psychographics (their wants, needs, frustrations, etc.).
Once you have a good understanding of your market, test your idea by creating a prototype, offering a trial service or creating a website with a “buy now” or “learn more” button to gauge interest. These are low risk ways to learn more about your market and find out if there is a demand for your product or service.
A Healthy, Growing and Stable Industry
It takes more than just a great product to start a successful business. Many promising, high-quality products, from cars to tech gadgets, failed to turn a profit because the industry was too volatile. The airline industry, for example, has been stagnant for decades, and very few airlines are profitable today.
Success comes to those who find businesses with great economics, and not necessarily great inventions or advances to mankind. Choose a business where you have a chance to thrive, not just survive.
Excellent Financial Control
Entrepreneurs come from a variety of backgrounds, from restaurants and transportation to music and manufacturing. Some entrepreneurs have an accounting background, but most need to go back to school to learn these skills (or they hire an expert).
If you don’t have financial knowledge, seek help from someone who does before you create your business plan. Would you bet your savings in a game where you didn't know how to keep score? If you wouldn’t do it in a game, don’t do it in business!
Financial Management Skills
Build a qualified team to evaluate the best options for utilizing retained earnings , such as investing back into the business or buying other businesses. This is vital to the long-term success of your business, and without a professional, you may miss out on new opportunities and greater 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. There will always be a business who can offer a better price, but if you offer a superior product, you’ll have loyal customers for life.
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. Some of the most successful businesses looked very different when they started out than they do today, and their business plans reflect that change.
Wrigley, for example, started out by selling soap and baking powder. The company didn’t start selling gum until William Wrigley Jr. discovered that the free gum he gave away with his purchases was more popular than his actual product! Great business owners aren’t afraid to pivot when their initial plans fall through. There’s nothing wrong with changing your plan!
Whether you own an established business or a startup, these seven components will put you on the right track. Be sure to download MOBI’s Business Plan Template and get started on Section 1 (The Business Profile). The template provides leading topics, questions and suggestions to guide you through the process, so you can be sure your business is on the path to success.