Every start-up company needs a good business plan and an effective business strategy.
They’re distinct but equally necessary and you shouldn’t confuse one with the other.
You can’t expect to get past first base without a plan. A clear, well-written explanation of what you intend to sell and when you intend to sell it, is the document you will take to your bank manager if you want to get a business loan and to investors if you’re seeking financial backing.
You’ll also need an effective and flexible strategy. It’s the road map that takes you where you want to go and informs how you aim to achieve the goals set out in your plan.
It should be the beating heart of your business; a living, breathing organism, responsive to change and the collective property of everyone in the company, no matter how lowly their position.
Don’t confuse a business plan with a business strategy
A problem for many start-ups is that they confuse their business plan with their strategy. They decide from the start what they want and how they will seek to achieve it are part of the same, written-in-stone pact; an unyielding commitment to a path they will stick to, come hell or high water.
That confusion can be dangerous, principally because it doesn’t account for changes in circumstance; it assumes that all of the variables that prevail when they launch their business will hold true one, three or five years down the line.
They ignore the fact that variables are so-called for a reason and that building a successful business, without exception, will mean making mistakes and learning from them.
What to include in your business plan
So what exactly is a business plan as opposed to a strategy? What should you include in your plan and how can you incorporate it into an effective strategy?
Your business plan should be a document that explains your background, what the company aims to sell, how it is structured and what outcomes it aims to achieve. It should also demonstrate a clear understanding of your market, who your customers are and any funding requirements.
Keep the plan short – no more than four or five pages – and professional looking and focus only on what your intended audience needs to know. Eliminate waffle and makes sure it’s grammatical and that there are no spelling mistakes.
Be realistic about your forecasts and assumptions. Over-optimistic sales forecasts can damage credibility with financiers, business partners and employees all of whom will see through a plan that ignores weaknesses or threats. They can also lead to increased overheads, resulting in a cash-flow crisis and cost-cutting, all of which can damage morale.
Explain your progress to date
Even if the plan is for internal use only, it’s a good idea to write it as if it were aimed at an outsider, giving details about the history and current status of the business.
Explain when the business started trading and what progress it has made to date as well as who launched it and what its current ownership structure looks like.
Detail your product or service
Describe your product or service, avoiding jargon, and explain what makes it exceptional. What benefits does it offer? What are its disadvantages and how will you address those?
Describe the industry and marketplace
Explain the principal characteristics of the industry, mentioning any regulations you’ll be obliged to meet, who the big players are and any recent significant changes in technology.
Describe your market, highlighting niches or areas of the market in which you’ll compete;
- What do your customers look like in each area?
- What is your market share?
- How has the market changed or been affected by recent trends?
Summarise your marketing plans
How will you position your product/service? Is it high end and does the price reflect that? Should it be marketed as a specialist product and, if so, what separates it from the competition?
About your team
What is the structure of your management team, what skills do they have and how do they complement one another?
Do you have the necessary skills in key areas of production, sales, marketing, finance and administration? Address any areas of deficiency and outline your plans to overcome this and build a team that will deliver on your goals.
Outline the steps you will need to take
It’s also important you show that you have thought about what steps you need to take. Address questions such as;
- Do you have the capacity within your business to achieve your stated targets?
- Is it likely you will need to move to bigger premises?
- Are your IT systems reliable
- Are there any quality/regulatory standards to which you need to conform?
Listen to feedback and adapt
You will know if your plan is any good by the reaction it gets. Take criticism on board. Don’t assume the bank manager or your Business Gateway handler simply doesn’t understand the market. Learn from the feedback you get and make necessary changes.
The importance of your strategy
Once you’re trading, your thoughts should now turn to your strategy. The most important quality you can have as a business owner is flexibility. Recognise where opportunities exist and adapt your expectations accordingly.
To borrow a sporting metaphor, if your plan is to beat your cup final opponents and lift the trophy, your strategy is your game plan that will help you to achieve that.
It’s an ongoing process that involves marshalling the skills and talents of your team, making the right strategic decisions and knowing when to rethink your priorities.
Switching strategy for success
Apple started out as a manufacturer of music technology hardware but now it makes almost as much money from its music and video streaming services.
If it hadn’t made the right decision at the fork in the road when streaming started to overtake downloading, then it might not now be the world’s most successful technology company
At every step on the road to building your company you’ll be faced with choices and each one could be the most crucial you will make
- Should you seek to maximise profitability at the expense of investment;
- Should you specialise or aim for greater market share;
- Should you diversify your product range within existing markets or stick to one successful product and enter new markets?
Pursuing the right strategy means having a proper understanding of all of the factors, internal and external, that will have an impact on your growth plans. You can’t do everything yourself and so that will, inevitably, mean delegating tasks.
Business owners are generally self-reliant and confident in their own vision and abilities and they don’t easily take to handing responsibility to others. But that’s what you’ll have to do if you’re to be successful.
Having the right plan can be the difference between success and failure in business but the right strategy will determine ultimately how successful you are.