Show me a failed business, and I’ll show you a business founder that either didn’t write a business plan or didn’t properly execute the business plan they wrote. If the business founder failed to write a business plan, their probability of succeeding was about as high as their probability of hitting a 100 mile per hour fastball off a Major League Baseball pitcher (slim to none). Even if the business founder wrote a business plan, the founder more than likely viewed the business planning process as a necessary burden (and let their business plan rot on a bookshelf as soon as it was completed). In either case, the business founder overlooked the true value of writing a business plan. Writing a business plan is the one chance a founder has to validate whether a market exists for their business concept, before they unnecessarily waste a lot of money and time.
Let’s look at the components of a business plan, and how each component provides founders with the opportunity to succeed through flawless execution. The first section of the plan is the Company Description, where founders have to articulate their value proposition. In other words, what’s going to motivate a prospective customer to buy from you, and who exactly is this customer? What the average business founder doesn’t understand is that almost half of all purchases are done impulsively, and in more than 70% of these cases it’s because consumers feel that the company’s brand that they’re purchasing from aligns with their values. By using this section of a business plan to tell the world WHY you started your business, you can broadcast to the world what you value (thus providing consumers who value what you value the opportunity to connect with your brand). During the business planning process, you can also introduce your brand to a focus group of consumers. As the consumers who value what you value begin to identify themselves, you now have the opportunity to figure out what the demographic characteristics are for your niche target client (which allows you to save on marketing expenses by only marketing to consumers who share these demographic characteristics).
The second section of the plan is the Product & Service Description section, where founders describe the customer problem that they can solve better than anyone else. Even though almost half of all purchases happen impulsively, attempting to solve a problem is what starts the buying process for a consumer. For example, if you’re hungry and have no food at home, you go to the grocery store (or a restaurant). As a result of the fact that you’re shopping while you’re hungry, you’re more inclined to buy more food than you need (or order more food than you can eat). Using the same focus group process that helped a founder identify their target market client, provides the opportunity to identify what problems aren’t being adequately solved for these prospective clients (and the extent to which these problems negatively impact the prospective clients’ business). This knowledge helps a founder perfect their solution, understand how the solution is superior to competitors, and helps to quantify how prospective clients will benefit from implementing the solution.
In the Marketing Plan, or third section of the business plan, founders articulate the optimal method of delivering their solution to their target market clients. Research conducted for this part of the business plan tells a founder everything they need to know about the competition they’ll face (for example, who their competitors are, what solutions competitors provide to the customers they serve, who competitors customers are, how competitors price their solutions, and how competitors deliver their solutions to their customers). This insight provides a founder with the opportunity to either chart a uniquely different path to target market clients than competition, or to replicate the path already blazed by the most successful competitor (while improving any identified weaknesses in the replicated competitive solution).
In the Operational Plan, or fourth section of the business plan, business founders describe the people, places, and things (or delivery mechanism) utilized to deliver the target market problem solution. Research conducted for this section of the plan will allow founders to identify processes, procedures, and people used by their most successful competitors to deliver similar solutions to their customer base. By reverse engineering the operational systems used by the most successful competitors, founders can avoid the mistakes made by their competitors as they refined their solutions (which will save founders both money and time, thus allowing them to reach the point where sales exceed expenses in less time than competition).
In the fifth section of the plan, or Management & Organization section, founders identify the leadership and advisory team that gives them the best chance to successfully deliver their customer problem solution to their niche target market. This part of the business plan is the highest predictor of entrepreneurial success, since a trustworthy support system is shared by all successful founders. In other words, this section of the plan is where you identify the people who’ve already successfully accomplished what you want to accomplish (since from experience they know what obstacles you’ll need to overcome along the way, and can help you craft the most expeditious path around or over these obstacles).
In the final Startup Expenses & Capitalization and Financial Plan sections of the business plan, founders attach revenue and expense projections over a three-year period for everything described in the first five sections of the business plan. These projections tell founders how long it will take before the business will be able to fund its’ own growth, and how much capital needs to be raised to get to that point. The assumptions made to create these projections allow founders to explain what the future of the business holds to anyone who wants to understand the business (regardless of whether this person has a financial background or not). Disputes over the validity of any assumptions made are easier to resolve than disputes over financial statements, and the resolution of these disputed assumptions allow for the dynamic and immediate updating of the assumptions (thus dynamically updating the financial statements created as a result of the revenue and expense projections). Once agreement has been reached on the assumptions underlying the business plan (with whomever the business founder is explaining the business plan to), there is no rational reason not to agree with the financial statements derived from these assumptions. And as the business plan begins to get executed, business assumptions can be updated with actual results (thus maximizing the probability of success).
If you found this article helpful, please share it with other entrepreneurs in your network. If you have questions about anything in this article, or would like my insight on a question about any aspect of the entrepreneurial process, please connect with me on Facebook (https://www.facebook.com/thinkbigwithgeoffreykent), LinkedIn (https://www.linkedin.com/in/thinkbigwithgeoffreykent/), or Instagram (https://www.instagram.com/thinkbigwithgeoffreykent/). I also believe that 50% of entrepreneurs fail within 5 years, because they lack the resources to properly execute their vision. Leveraging what I’ve learned over a 40+ year successful entrepreneurial career, I’ve developed a methodology to help entrepreneurs build their unique customized strategy for responsibly scaling exponential business growth. To gain access to my 7-week online course, collaborate with like-minded entrepreneurs through the exclusive “Think Big” Facebook group, regularly communicate with me, and gain access to my extensive professional network, connect with me on my course page (www.thinkbigwithgeoffreykent.com/).