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The Ten Keys to a Successful Business Plan

Written by: Bill Warner

Article Overview: If you were to ask twenty experienced business people what it takes to have a successful business plan, chances are you will get many of these answers and more. Here is my view of what a successful business plan is made of.

The Ten Keys to a Successful Business Plan

If you were to ask twenty experienced business people what it takes to have a successful business plan, chances are you will get many of these answers and more. Here is my view of what a successful business plan is made of.

"Most importantly, have the passion for your business."
* Confirm that your entire heart and soul is behind the business.
* Insure you have family and friends supporting you.

The Challenge: Having the passion for your business means it is something you may want to do for the rest of your life. It is not a sideline until the job market improves. It is not something you can manage part-time while you are looking for a "real" job. You may not be passionate about the idea initially, but if you don't become passionate as you do your research, beware. Sometimes, your passion will be the only thing that will keep you going.

"Define your market."
* Focus on large and growing opportunities.
* Intimately understand your buyer's wants and needs.

The Challenge: A market is a group of buyers that have common buying wants and needs. Business owners need to understand if the market is big enough to go after and whether or not it is reachable. Many small businesses fail to define their market, lack emphasis on customers and groups of customers (market segments), and how to reach buyers in those market segments. Your market definition should include market size, growth rate, market trends, market influencers, number of buyers, buyer wants and needs, competitive analysis and regulatory influences. Test your definition by meeting with other companies in your market segment and with potential buyers.

"Ensure you have a winning business model."
* Understand everything that affects your market segment.
* Determine if your business will produce results.

The Challenge: A business consists of a market and a product or service; not just an operation or a product. You must define both. Export-import is not a business; rather, "importing decorative candles for sale by mail-order to wealthy collectors of oriental art" defines a business. You need to understand how your business will coexist in your selected market segment. How will your business operate within an environment of suppliers, manufacturers, distribution channels, competitors and buyers? Put the whole picture together so you know how your company fits in.

"Know how to beat your competitor(s)."
* Understand their strengths.
* Exploit their weaknesses.

The Challenge: New businesses need a creative concept. Sometimes they just follow the pack; thus have no competitive advantage. New businesses cannot ignore the competition. You must look for underserved niches in the marketplace. The creative concept does not have to define a totally new class of business, but rather a "twist" on an existing business may be adequate. Know all about your competitors and clearly understand how you will beat them. With a product that is uniquely differentiated and satisfies the buyers need, you will win more than you lose.

"Create a winning product or service."
* Provide what the buyer wants and in the way they want it.
* Have a plan to expand to new opportunities.

The Challenge: There are three strategies for success in dealing in a competitive environment: lowest cost (not lowest price), best product and market focus. The first two are difficult or impossible to achieve for most small businesses. The third, focus, requires management discipline and overcoming the urge to do too many other things. If you really understand your buyer and know what it takes to win against competition, your product or service will be easy to sell. Anything less will lead to failure.

"Have a compelling value proposition."
* Solve a truly important problem with an attractive return on investment.
* Make sure it fits into your buyer's priorities.

The Challenge: You must fit within your buyer's priority list for planned purchases. The benefit of your product has to be at the forefront of your customer's needs. The best way to express the value of your product or service is to present a return on investment (ROI) analysis. You should be providing either higher revenue or lower cost/expense, and it should take less than a year to pay the investment back. Anything else is probably a "nice to have," and is unlikely to win in a market where buyers are only purchasing "must have" solutions.

"Have a targeted marketing plan."
* Know how to reach your buyer to gain awareness
* Establish a cost effective lead generation plan

The Challenge: Select the right way to deliver your message to your potential buyer: advertising, trade articles, mail or email campaigns, telemarketing, distributors, value added remarkets, dealers or direct sales force. Many companies are over-reliant on franchises as offering a silver bullet strategy for support and getting started. They don't sufficiently analyze what the franchiser brings to the table that you can't do for yourself. Franchisees sometimes over-estimate the value of the support from the franchiser; in that, is it worth the franchising fee and the royalty payment? Can those costs be made up by efficiencies offered by the franchiser? Can those costs be passed on to your customer? If not, the franchisee is at a competitive disadvantage. Those with a "brand" that can bring customers in the door on "day one" and provide active business operation assistance, rather than arms length promises, are particularly worth looking into. Once you have generated qualified leads, manage them through the entire sales process.

"Create the most efficient sales channel and excellent customer support."
* Ensure the sales approach is affordable
* Build satisfied customers

The Challenge: Establish a sales forecast. Hoping for sales is not planning. Sales forecasts are based on understanding the buyer in your selected market segment and on the experience of others in it. Many new companies underestimate the time it takes to build a business to the point where it is profitable. As a result, many new businesses are under-financed and have insufficient working capital to sustain themselves in the initial growth period or during seasonal downturns. Being new and small is no excuse for cutting corners in dealing with customers. Would you go into a shop in the mall with cheap looking furnishings and lighting? Don't try to save money there. Your sales and support efforts should be guided to create a satisfied customer who is willing to be a reference to other potential customers and give you repeat business as well.

"Understand your entire financial model."
* Establish realistic sales, cost, capital and expense plans
* Understand cash flow and profit dynamics

The Challenge: Establish a solid financial plan. Many new companies are unplanned or under-planned. Planning cannot deal with all the surprises in the real world, but why be surprised by things you can anticipate and deal with beforehand? Planning requires a highly detailed and kinetic vision of the future of the business that reduces that vision to the language of business, dollars and cents. A financial plan is required to raise money from banks and investors in addition to helping you set financial objectives. Many new companies try to save money by avoiding the costs of lawyers, accountants and insurance agents. One mistake can cost you many times the small cost of relying on experts. Operationally, the most important financial dynamic to understand is cash flow. Know how money comes into and goes out of your company and when the transactions occur. The penalty for not managing your financials well is running out of money and probably losing your business.

"Ensure you have a winning team."
* They should have the passion for success
* Attract the best experience and know-how

The Challenge: Pick the best people for your company. Many new businesses reach too far in a single step; for example, starting a trucking business without any prior experience. Take it "step-by-step". Often the first step is to get a job in a business similar to the one you want to start. Learn the business from the inside out. Then start your own business. With the right experience under your belt, build your team with people that fill out the strengths that you need to run your business. Pick only the best people that can get the job done. Avoid hiring friends and family.

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Article Tags: business model, business owners, business plan, competitive analysis, decorative candles, export import, family and friends, heart and soul, mail, market focus, market influencers, market segment, market segments, market trends, part time, regulatory influences, rest of your life, sideline, small businesses, successful business



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