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We get it — it’s an exciting time for new businesses. Technology has put the world at your fingertips and seemingly eliminated the gap between the MBA-types and the crafty, untrained entrepreneurs. You now have the tools to become your own boss and build something that impacts all of humanity.
And we get it — competition moves fast. So fast, even, that the best time to start up your new business was probably yesterday. Which likely explains why 33% of startup founders from ages 18-34 have launched a company in just one month, and 69% have done so without a business plan.
Now, that last bit is cause for some concern.
Although it’s true that most rules of business don’t apply anymore, and it’s even true that business plans aren’t what they used to be, the fact remains that business plans are absolutely crucial for success, regardless of your size or experience.
As Robert King, director of small business for Intuit Canada, says, “nobody anticipates failing, but a lot of people who are failing to plan are planning to fail.”
But if a modern business plan isn’t some lumbering tome of a document, what is it?
King says that these are the five, “mission critical” characteristics of a lean business plan:
What some small business owners may not understand is that — in the early years —a business plan is more of a diary than an instruction manual. Your business plan should be a tool for reflection and growth; something that encourages you to regularly evaluate your business decisions and make changes. And in order to make sure your plan stays fluid, it’s important to keep things as simple as possible.
“I think now, the business planning process is not so elaborate,” King says. “It’s really about a rolling kind of 90 to 360-day document that is updated as your business progresses.”
2. Knowledge of the customer
Customers make businesses possible. While that might seem obvious, losing sight of your customer’s identity is one the easiest mistakes to make as a budding entrepreneur. Every business plan should present an idea of who the business is targeting, and what actions should be taken to drive conversions.
Of course, pinpointing your exact audience isn’t easy. That’s why a helpful business plan will serve as a testing ground for consumer insights and evolve as time proves or disproves your customer hypotheses.
3. A clear understanding of your value proposition
Why should anyone be interested in your offerings? One of the most important parts of a business plan, both for you and your investors, is proof that the business can be meaningful to consumers.
“[People] get caught up in the romance of being a startup, but the reality is you’re selling stuff,” King says. “And, so, you need to know, ‘what is going to make my customer happy — what is the benefit to them?'”
Using your business plan to keep track of your value proposition and the way it changes will help keep the business grounded in customer benefit.
4. Keen awareness of your product and its competitive advantages
Your product is only valuable if you can differentiate it from the competition. And attracting investors, or simply making it through your first year in business, relies heavily on creating competitive advantages.
Simply put, your business plan must be able to provide a high-level analysis of your product and justify why a customer would choose it over a similar product. Again, fluidity is key; what you might’ve thought was your greatest competitive advantage may not ultimately resonate with consumers — forcing you to rethink the way your product should stand up to its competitive set.
5. Basic, ‘Finance 101’ calculations
Making money is the name of the game, so every great business plan must be able to break down how a company will pursue financial viability. King says operating costs — simple money in, money out — are a focal point, and you can make a compelling financial case for your business without complex math.
However, King also admits that small business owners could greatly benefit from some guidance when putting together their financials. “That’s where accounting software, matters to you. It becomes more of a business operating system for your startup.
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