Step 1 - Create a Business Plan
We’re ramping up to the launch of our Seven Day Business Starter course and we are excited to share some of the content with you.
Over the next few weeks we’ll be detailing the seven steps you can take to start your business and make your first sale.
Find out more about the Seven Day Business Starter Course, including a pre-launch discount code specifically for readers of this blog.
In this article, we’re going to walk you through the very first step to starting your business - creating your business plan.
But we’re not talking about some 50 page tome that you’ll never look at again.
You want your business plan to be concise and include KEY details that you’ll actually refer back to.
It’s information you’ll use to keep you pointed in the right direction as you build your business.
In the spirit of conciseness, let’s get started!
Business Plan Outline
You could get really deep in the weeds and create a business plan to try and account for all variables.
However, we see so many entrepreneurs get stuck in the planning phase and never get their business off the ground.
Here is the structure we recommend to create a business plan that will serve you for the long term:
- Start with your “Why”
- Understand your target market
- Make your offer valuable
- Define what success looks like
- Determine what funding you’ll need
Start with Your “Why”
Before you get into the nuts and bolts of your business plan, it's crucial to start with your "why." This is the core reason you're embarking on this entrepreneurial journey.
Is it financial freedom you seek? A desire to solve a specific problem in the community? A passion project that has grown bigger than you?
Your "why" will serve as your North Star, guiding you when times get tough and decisions get complicated.
How to Identify Your Why
- Self-Reflection - Spend some quiet time thinking about what genuinely drives you. What are you passionate about, and what impact do you want to have?
- Ask the 5 Whys - Start with a basic reason for starting the business and ask "why" five times, each time diving deeper, until you reach the fundamental reason behind your motivation.
Identify your “why” and put it in writing. Place it at the top of your business plan in bold letters.
Including your "why" in your business plan sets the tone, making it more than just numbers and tactics; it becomes a mission.
Understand Your Target Market
You likely already have your business idea in mind, but I want you to consider whether you have found the right market for your product or service.
Finding the right market isn't just about throwing a dart and hoping for the best. It's about aligning your product or service with the people who will benefit the most from what you have to offer.
Get this right, and building a business that attracts customers from the beginning becomes way easier.
Here is what we want to consider for our target market.
- Market type - is it a growing market (think face masks during the pandemic), a dying market (print newspapers for example) or somewhere in-between?
- They have a problem - we want our target market to have a problem that we can solve for them. The bigger the problem, the more value they may place on finding a solution. Does your target market have a big problem you can solve for them?
- Purchasing power - we want our target market to be able to afford to buy our product or service to solve their problem. Does your target market have the funds to purchase your offer?
- Easy to target - we also want to be able to reach the market with our message. Can we easily identify where our target market congregates or what content they consume?
Ask yourself the four questions above and write the answers down on your business plan.
Consider whether you can improve your business by changing the target market so the answer to each question is positive.
If a change is needed, you can still provide the product or service that you had in mind; you’ll just shift your marketing to focus on a specific audience that meets these criteria.
Make Your Offer Valuable
Great, we’ve now got our business idea and audience of potential customers in mind.
Next up it’s time to make your offer as valuable as possible for that target market.
There are a few ways we increase the value of our offer
- Solve their problem - this is the core of our product or service. We solve the big problem that our target market has.
- Increase certainty - we then want to show certainty that our product or service will solve their problem. For example, this could be done with testimonials, customer reviews or a money-back guarantee.
- Decrease time delay - we want to reduce the amount of time between when our customers buy our offer and when their problem is solved. We all want stuff done now, rather than later.
- Decrease effort and sacrifice - lastly we want to minimize the amount of effort and sacrifice for our customers. Make it as easy for them as possible. Think of the “buy it now button” on Amazon. It doesn’t get much easier than that.
This way, we’re showing our prospective customers that our offer is certain to fix their problem, quickly, with as little of their effort as possible.
Create an offer statement that answers the questions:
We help whom? Do what? In how much time? And how much effort?
For example, the Seven Day Business Starter Course has an offer summary that says:
We help Canadian entrepreneurs start their businesses and make their first sale in just seven days with a focused effort of two to three hours per day.
Once you’ve created your offer statement, consider how you can improve it based on our value criteria.
The next step of our business plan is to define what success looks like.
If we don’t know where we’re going, then it’s going to be pretty tough to make the right decisions along the way.
We’re going to build out our core values and core focus and then paint a picture of what our business looks like as a huge success in ten years.
Identify 3-5 fundamental values that will serve as the ethical and behavioral compass for your business.
For example, Avalon Accounting’s core values are:
- Reliable - we do what we say we’re going to do
- Simplify - we speak in plain language
- Compassion - we care and we show it
- Proactive - we think ahead and are solutions focused
- Diligent - we take pride in our work
You’ll then define your core focus which is the primary "What" and "Why" of your business.
Answer the questions:
- What do you do best?
- What is your purpose, cause or passion?
Going back to Avalon Accounting as an example:
- Avalon provides accounting, bookkeeping and payroll services
- To help small businesses thrive
10 Year Target
Next you’ll Look a decade ahead and set an ambitious goal for your business.
You want to consider what your business would look like when it’s wildly successful. Use that mental image to paint your picture.
This should feel a bit “out there” and challenging to achieve.
It can help to start with a revenue number and a profit number.
Then picture what that looks like in terms of other measurables. For example, the number of locations, number of customers, average revenue per customer, or number of employees.
3 Year Picture
Now that you have your 10 year target, you’ll work backwards to figure out what the 3 year picture looks like.
Use the same measurables as you did in the 10 year target but use a date that’s three years down the road.
This closer milestone will help you better understand what needs to be done in the near-term to reach your 10 year target.
1 Year Plan
Continue to work backwards to define what outcomes you want to achieve in one year from now.
Consider your 3 year picture and determine what needs to happen one year from now to set you on track.
These new 1 year measurables then become your overall goals for the year.
By working backwards from your ten year definition of success, you’ve created milestones that need to be achieved.
Now when you’re faced with decisions each day, you’ll make the choices that take you closer to your 1 year plan.
Start by writing down your core values and core focus as the guiding principles of your business.
Next, outline your 10 year target, then break it down into a 3 year picture and a 1 year plan.
This multi-level approach will serve as your business roadmap, guiding you towards long-term success.
Determine What Funding You'll Need
To give your business the best chance at success, you'll want a clear understanding of your financial needs.
Here's a simple breakdown that we’ll use to determine our funding needs.
We’ll begin with the startup cash that’s available to you.
This is the amount of money you have on hand to invest in your business and cover costs before your revenue kicks in.
It could include sources like:
- Personal savings
- Family and friends
- Government grants
- Bank loans and lines of credit
- Angel investors
Then we’ll look at your startup costs which include one-time expenses required to launch your business.
Some examples include:
- Business registration
- Equipment purchases
- Initial marketing
- Software purchases
- Support services (accountants, lawyers, web developers etc.)
These are your regular expenses that will recur each month after your startup phase.
- Marketing expenses
- Rent and occupancy costs
- Software and web hosting costs
- Support services
Next you’ll create a forecast of your projected revenue.
This is the money you expect to earn from your business operations over a given period of time.
It’s not an exact science, but you’ll estimate how many customers you will serve and how much you will earn per customer.
Then project your revenue out over the next year using your best estimates.
Cash Flow Forecast
Once you’ve outlined your available cash, startup costs, ongoing costs and projected revenue, you’ll create a cash flow forecast.
This will help you understand how money will move in and out of your business and will highlight any surplus or shortages for the upcoming year.
The general approach is to
- Subtract your startup costs from your cash available.
- Then add your projected revenue and subtract your ongoing costs each month.
This will give you an idea of your financial health and available cash balance over time.
Here’s a simple example for a fictional remote-based bookkeeping business.
Startup Cash Minus Startup Costs
Then we estimate our monthly revenue by taking the estimated number of customers multiplied by the average revenue per customer.
And then subtract our monthly ongoing costs.
Here’s a simple example of what a six month cash forecast could look like. You should build it for the next 12 months, but the text got too small in the example so I kept it to six months.
We can see that as revenue goes up, the owner can start taking more from the business in the form of wages or owner draws.
And we also want to keep an eye on the cash balance to ensure there is enough to cover unforeseen circumstances.
Identify your cash available, list your startup and ongoing costs, and estimate your projected revenue.
Use these numbers to create a basic cash flow forecast.
This will help you understand whether you need additional funding or if and when your business can be self-sustaining.
Seven Day Business Starter Course
Keep an eye out for the next entry in our Seven Step Guide to Starting Your Business where we discuss registering your business.
The next article explains the decision of whether to incorporate your business or not. It also details how to go about registering your business.
You can also learn more about the Seven Day Business Starter Course and get a pre-launch discount code for Avalon blog readers.