Many new entrepreneurs get so carried away with their brand buzz or their product publicity that they skip the most important step on the business ladder – creating a business plan. So here are 7 fool-proof tips to help create a strong vision that will ensure that your new business doesn’t come crashing down before you reach the top.
1. Don’t Wing It
If you think drawing up a business plan is a waste of your precious time which could be better spent earning money for your new business, then you’re heading for a fall. Being a successful entrepreneur means you have to work hard at the small details now before you can reap in the big bucks later.
A business plan allows you to see how solid your business really is. By pooling together facts, figures and contacts you can get a concrete idea of the assets you have, but also of what you need to work for in the future.
And don’t just dash off a business plan quickly as part of your ‘to-do’ list. Think carefully about each aspect of your business. When it comes to attracting investors and customers later on down the line, you won’t be able to wing it with a one-pager like you did in at high school. This is business, not homework.
2. What’s Your Final Destination?
When you program your car’s satellite navigation system it requires a starting point and a final destination. A business plan is no different. You can give the details of where your business is coming from right now but you also need to factor in what you want your business to look like in one, three and five years’ time.
Create a plan around your current mission statement but include a projection of your business in the future that leaves your idea room to expand and take off in ambitious directions.
3. Business or Pleasure?
Is your business idea a real money-spinner or is it just a hobby? There are some lucky entrepreneurs out there who manage to combine the two, but unless your passion project can turn in a profit, you might need to re-think your motives. Your family might think you’re onto a winner knitting winter jackets for squirrels but unless there’s a market out there for it (and you don’t want to just be paid in nuts) you might as well just go back to your day-job and leave the knitting for your leisure time.
Do your research and find out if there’s a gap in the market for you, a little niche you can carve for yourself that no one else has occupied but that people are willing to pay you for.
4. Realism v Ambition
The next step is to focus on how much money you can make. As you’ll no doubt be sharing your business plans with potential investors you’ll want to paint a sunny picture of your business. But before you start plucking figures from the air, just take a long, realistic look at what you can actually achieve. If you hope to sell 100 units of your product, then it might be wise to predict that you will definitely sell at least 50.
Having big ambitions for your business is a great motivator but if you’re too pie in the sky with your figures you could find yourself disappointing not only yourself but your investors too.
5. Gross Exaggerations
There’s a huge difference between what funds will come into your company (your gross profit) and what funds will actually go into your pocket (your net profit). Don’t make the newbie mistake of forecasting a million dollar business when you haven’t taken into account any salaries, production costs and – the big killer – taxes. Just use a simple Excel spreadsheet to map out all your figures and factor in all your possible costings.
As you work through your business plan, you will realize there are some stats you just can’t predict. But there’s someone who can point you in the right direction – a qualified accountant.
You’ll need to employ one later on anyway to help you file your tax returns, so getting an accountant on board at the startup stage will stand you in good stead. Not only can they help you with your business plan figures, they can also point out certain financial benefits or subsidies you may not be aware of. Accountants might seem like a huge expense when you’re only starting out, but they could save you a fortune (and a ton of heart-ache) later on down the line when all the paperwork needs to be filed.
6. Keep It Simple
When presenting your business plan, it’s best not to overdo the theatrics. There are some pretty fancy applications out there that can grab an investor’s attention but unless you have the solid figures to back up your spectacular light show you won’t be closing any deals.
Keep your presentation clear and direct. Wow them with your ideas and your business plan, don’t confuse them with unnecessary graphics.
7. Believe It
If you don’t believe in yourself or your business, then no one else will. Give a run-through of your business plan to friends, family and colleagues to see if you can convince them with your idea. Get them to ask difficult questions that may put you on the spot and test all aspects of your plan.
These run-throughs will help you iron out any wrinkles in your idea which will in turn give you more confidence in your new business. It’s always better to confront the problems before you start out rather than later on when you’ve spent all your time and money on a half-baked idea.
A business plan allows you to see the strengths and weaknesses in your idea and gives you the breathing space you need to sort those weaknesses out and build on your strengths.
So for all the wannabe entrepreneurs out there who are thinking of skipping the business plan step – please think again. It could be the difference between you clinging on half way up the ladder rather than speeding right to the top.