One of the most versatile documents a business can and must create is a business plan. While most companies know to create a plan when starting out, when done right, the real benefits come later.
Let’s start by discussing why most organizations create a business plan in the first place. There are two core reasons. The first is funding. Unless you’re Elon Musk, if you want funding for a new venture, you need to present banks or investors with a business plan.
The second reason why business plans are created when launching is for strategic purposes. When hashing out a new concept, putting it on paper helps you to cover all the bases. These bases include discussing your market size, customer targets, marketing plan, management team, operations plan, and financial projections.
Documenting your thoughts forces you to think through the opportunity. Is it worth pursuing? How am I going to attract customers? Who must I hire? How much funding do I need? Being able to answer these questions are key to your initial success.
Unfortunately, most businesses never update their business plans. This is a shame, since doing so can greatly improve your success. So, I encourage you to update your plan, and leverage the following 4 concepts to make it dramatically better.
1) Explain Why Your Company Is Uniquely Qualified to Succeed
In my business plan template, I have a key paragraph on the first page that starts with the following phrase: “My business is uniquely qualified to succeed because.”
This is one of the most important paragraphs in any business plan. Why? Because if your business isn’t uniquely qualified to succeed, how can it thrive? What’s to stop competitors from stealing your sales and profits?
Let me use an example of a local bakery to illustrate this. Let’s say your bakery is doing okay, but there’s nothing unique about it. And then one day, another bakery opens a block away. What’s going to happen to your sales and profits? Most likely they will go down significantly.
Now, let’s consider a scenario in which your bakery was uniquely qualified to succeed.
Let’s start with your team. If you had a highly trained team that knew how to bake superior products and provide great customer service, that would be a unique qualification that would keep sales and profits strong despite competition.
What about your customers? What if you had a large group of customers paying you on a monthly subscription for your baked goods. That would be unique. And what if your bakery had relationships with coffee shops and other retailers which sold your products. Most of these sales would survive competitive pressures.
And what about marketing? Let’s say you’ve secured an exclusive sponsorship for local events that constantly put your bakery’s name in front of customers. This too would make it harder for competitors to steal your business; in fact, it would probably deter competitors from even entering your market.
I hope you get the point. Creating unique qualifications to succeed, like the examples above, will fuel both your short-term and long-term success. So, when you write your business plan today, start by documenting why you are currently uniquely qualified to succeed. And, more importantly, brainstorm ways in which you could add new unique qualifications and how you will attain them.
2) Break Out Your Long-Term Goals into Smaller, Actionable Milestones
Great accomplishments do not occur overnight. Rather, they can take weeks, months and even years. And importantly, great accomplishments are often comprised of multiple pieces. The key to success is to break down your goals into smaller milestones you can attain.
Let’s say you’d like to build a new product in the next year (ideally a product that will make your company more uniquely qualified to succeed). That’s a good annual goal. But in order to actually achieve it, you should break it into smaller milestones in your business plan.
For example, you might write that in the first month you’ll document the key product features you’d like to build. During months 2 and 3 you will build a basic prototype. During month 4 you will share the prototype with your team and gain feedback. During months 5 through 8 you will incorporate feedback and build the beta version of your product. During month 9 you will beta test the product with real customers. And during months 10, 11 and 12, you will refine the product and get it ready for launch.
By breaking out your long-term goal into smaller, actionable milestones, your chances of achieving it grow exponentially. It also makes management much easier. At the beginning of each month everyone on your team knows the goal, and at the end of the month you can assess performance against that goal. Importantly, you can course-correct each month as needed if you’re ahead of or behind the goal. Conversely, by simply setting an annual goal, you wouldn’t be able to course-correct for months, and would most likely not complete your goal on time.
3) Update Your Financial Projections
At a minimum, you need to create a new financial forecast annually. From a goal perspective, if your team doesn’t have clear sales goals, you’ll limit your success. Likewise, if sales are too low, and you haven’t accounted for this possibility, you may run out of cash. And conversely, if sales are too high, you may not have the funding to fulfill them.
By creating annual financial forecasts, you cannot only set goals to motivate your team, but you can be made aware of potential cash shortfalls in advance. This allows you the time to raise external funding if needed. Raising funding can often take 6 months or more, and many a company has either stalled or failed completed when hitting a cash crunch with not enough time to resolve it.
4) Identify Growth Opportunities
The fourth way to improve your business plan and your company’s success is to identify and pursue growth opportunities.
Most companies focus their growth on selling more of their current products/services to existing customers, which is known as “market penetration.”
While this is a solid growth strategy, there are 3 other options to consider:
1. Selling new products/services to existing customers (“product development”)
2. Selling existing products/services to new markets (“market development”)
3. Selling new products/services to new markets (“diversification”)
“Market penetration” and “product development” are the least risky (highest chance of success) of the four growth strategies and should be considered equally. While “market development” and “diversification” are riskier strategies, they must still be assessed as often the impact of succeeding with them can revolutionize your company’s success.
Importantly, when creating your business plan, brainstorm and consider all four strategies. Then decide as to which strategies you will pursue, and break each into smaller milestones as discussed above.
Updating your business plan at least annually ensures you have the best strategy and goals to succeed. Use the four tips above to make your plan even stronger, and to achieve the success you deserve.
Dave Lavinsky is a serial entrepreneur and the president and founder of Growthink. Since 1999, Growthink has helped over 500,000 entrepreneurs and business owners to start and grow their companies. Dave is also the founder of BusinessPlanTemplate.com which provides business plan templates for a wide range of industries.