A well-thought-out business plan is the lifeblood of your company when you’re first starting out. A viable business plan will help you determine the problem you are trying to solve and the market opportunity of the problem, how you will execute your strategy, and how much money you’ll need to make all of that happen.
Most startups fail for 2 main reasons:
- There isn’t a large enough market for the product or service you’re selling
- You run out of cash
Spending time creating a business plan up front will help you to minimize these risks.
Now I want to talk about the major components of successful business plans.
There are a few questions you need to answer when thinking about market opportunity:
- Who are your target customers?
- What pain point are you solving and how do you solve it better than anyone else?
- How big is your potential market size?
- Who are your major competitors?
The only way to know the pain points of your potential customers is to talk to them (in-person is best if possible). Find out what they don’t like about their current options. See how you can make their lives easier by using your product or service. There is no substitute for getting real feedback from your customers. Don’t spend any time or money building something until you know that people actually want it.
This is the part where you detail out specifically HOW you’ll achieve your business goals. You already know who your target market is (based on the previous section). In this part, you’ll detail out how you will reach them. A few questions to answer here include:
- What are the optimal marketing and sales channels to use to reach your audience?
- What kind of technology will you need?
- What kind of team will it take to reach your business goals?
- What are the key metrics and milestones you need to track to stay on course?
In this section, you’ll project your revenues, expenses, and cash flow for at least the next 12-18 months to see how much all of this will cost, how soon you’ll hit your break-even point (i.e. when will you be profitable), and whether any kind of outside funding will be necessary. A few questions you’ll need to answer include:
- What are your major revenue streams and how quickly can you ramp up each one of them?
- What are the critical expenses to keep the business running and how do these scale with growth?
- How much cash do you have to work with on a month-to-month basis?
- Do you need to apply for outside funding? (seed funding, bank credit line, etc.)
Taking the time up-front to build a business plan will exponentially increase your chances of success in today’s ultra-competitive marketplace.
Want to learn more about how to create a viable business plan?