Hey, let’s build a business plan today, doesn’t that sound like fun?
Not many people want to write business plans. And yet, they are important. Look at the three primary reasons why new businesses fail:
- Lack of Market Opportunity
- Ineffective Cashflow Management
- Hiring the wrong people
Every other reason also stems from these three. And these three reasons can be avoided with a good business plan.
A good business plan will tell you how to make decisions, address problems before they arise, and help you avoid the pitfalls above.
Market Opportunity: A business plan will define your market opportunity. It will go outside of your business, look at your clients, and define the opportunity present.
Cashflow Management: It needs to be proactive. It’s not about how much you spend; it’s not about how much money you make; it’s all about how you spend.
Hiring People: Part of what you are defining with a business plan, is your company culture. By understanding who you are, who you are serving and where you want to be, you create a description of the type of person who will bring you there.
I know: as a business owner it seems like a distraction to spend time on planning rather than doing. Well, here is the shameless plug: that’s exactly where I can help.
Having a Business Plan
It will be enlightening. It will give you answers to questions you had not yet known to ask.
Consider other reasons new businesses fail.
If your product isn’t unique enough or your business model is too cumbersome and expensive, these are all signs that you have not defined your market opportunity. You have not identified the core needs of the market, or their buying preferences. A better analysis will allow you to adjust your value proposition and your competitive choices.
Leadership and Management failures; and yes this can mean you as the business owner as well. A business plan lays out your differentiation, your goals, your strategies and overall, who you are as a business. Once you understand the people you want working with you, make sure that you are leading by example. Make sure your managers are people who will inspire the rest of the team, and promote a culture and ethic that is important to you.
It might be premature scaling, you grow too quickly. Good cashflow management is about planning ahead. You will understand where you can and should spend as you grow.
A business plan is a bit of upfront work to avoid these problems later on.
Watch out for more blog posts next week addressing the three points in a bit more details: market opportunity, cashflow management and hiring the right people.