And what’s the first thing you need for a successful business? A business plan.
Many women—including myself when I wrote my first business plan—can be intimidated by the idea. There’s research, writing, working on numbers. It can be tedious, to say the least.
But wait! I’m going to change your mind about developing a business plan – whether you’re just starting up or are already running a company. You’ll find the process of developing a business plan – and it’s the process that’s important – helps your company survive and thrive. And it’s going to help you make you more money. (I’ve got your attention now, don’t I?)
You may think you need a business plan only if you’re raising money from others. But that’s not true. Sure, you’ll need a plan to pitch your business to investors or to show to lenders. But as my mentor, Eugene Kleiner, told me, if your business fails, your funders may be able to earn their money back some other way. You’ll never be able to earn your time back. So you want to figure out if your business has a truly good chance of success before you take the plunge or expand in a new direction.
Developing a business plan provides you with an organized structure to think through the critical aspects of your business, forcing you to consider:
- What business are you’re truly in, what projects and good ideas to pursue and which to put aside. When you’re building your business, it’s likely you’re going to have a lot of good ideas—too many good ideas—of what products or services you want to offer. But you can’t profitably pursue all of them. Your business planning process should help you decide which of your products or services are the ones you should focus on first.
- Who are your best, most profitable customers? It’s likely that all types of people or businesses can benefit from your products or services, but trying to reach too many customers scatters your limited marketing resources. Think of the “target market” part of your business planning process as helping you identify the “bullseye” in your target so you can focus your efforts there.
- What makes you unique? What gives you a true, sustainable competitive advantage? What will make customers or clients choose you over competitors? Will it be the nature of your offerings? Convenience? Price? (for most small businesses, competing on price is a hard-to-maintain strategy.) You’re probably going to say it’s “quality,” but that can be hard for customers to determine, especially in a new business. I highly recommend looking for a “niche”—a specific demographic or industry customer—to specialize in, as an easy way to differentiate yourself.
- How much money will you need? When? For what? How much money will you realistically make? When will the cash flow into and out of your business? Ah, this is the big one. As a new entrepreneur, you’re optimistic. And many people who want to entice you into going into business (especially those in multi-level marketing schemes) will overstate your earning potential. Be realistic. And remember one of Rhonda’s Rules: Things take longer and cost more than you expect.
Surprisingly, I didn’t write my first business plan for my own business. I learned by doing it for someone else. I had quit a job I had grown out of, even though I didn’t have another job lined up. That was a big leap of faith for me, as I had been taught never to leave a job ‘til I had another one. Instead, I sublet my apartment in San Francisco and traveled, living in London as cheaply as I could for almost six months.
When I came back, I needed work. I was walking my dog, Teddy, in Golden Gate Park and started walking with another dog owner. During our long walk, he told me he needed a business plan for his sportswear apparel company, and asked if I might be able to write one for him.
I immediately said: “Yes!” (Hey, I needed the work.) But I didn’t know what a business plan was. So I went out and bought every book on the subject. They were terrible. But I worked my tail off on that business plan, and I learned a lot, including what novice entrepreneurs needed in a business plan guide.
That confidence in myself—that willingness to say “yes” instead of saying “no” changed my life. I soon started my business plan consulting business, developing business plans for all sizes of businesses in a wide variety of industries. When, a few years later, I was approached to write a business plan guide, I knew exactly what I had needed when I wrote my very first one.
Out of that came my book Successful Business Plan: Secrets and Strategies, just released in its 7th edition in conjunction with Small Business Week. I’m extremely proud to say it’s the best-selling business plan guide of all time. Successful Business Plan has sold millions of copies. It’s changed millions of entrepreneurs’ lives, including my own.
If you’re just starting a business, going through the business plan process is especially important, particularly important, especially for women, who often don’t have the access to capital as much as men.
Sisters Jill Burns and Kelly Gasink developed a five year business plan before they launched Austin Cocktails – a line of innovative and delicious bottled cocktails – even though they were self-funded at the start. The sisters say developing a business plan was a critical part of their success. “Writing a business plan can help you discern whether there is good reason someone else with better resources hasn’t done what you believe you can do,” said Gasink. “In our case, our segment of alcohol was too small relative to the bigger, bread and butter categories like vodka, tequila and whiskey, to receive innovation capital.”
“We spent months doing a deep dive into the spirits landscape, category growth, competitive field and consumer trends,” added Burns. “After feeling like we had the basics, we spent another 3 months talking to as many people in the industry who would take our calls and meetings and then wrote a business plan.”
Finally, there’s the question of whether the plan has to be on paper? From time to time, you may hear people say that it’s not necessary to have a business plan, but what they really mean is that it’s not necessary to have a “written” business plan. What you do need is the process of business planning. Remember, it’s the planning not the plan that’s important.
About Rhonda Abrams
Rhonda Abrams has helped millions launch and grow successful businesses. Her first book, Successful Business Plan: Secrets & Strategies, just published its seventh edition, and is the bestselling business plan guide of all time. Rhonda’s books have sold more than 2 million copies and been translated into 30 languages, including the popular Six-Week Startup, Business Plan in a Day, and Entrepreneurship: A Real-World Approach. Rhonda is the entrepreneurship/small business columnist for USA Today and, an entrepreneur herself, is the founder and President of PlanningShop.
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