Despite what many might think, writing a business plan is a lot of fun. It’s one of the things we at American Management Services tout to everyone either starting a business or getting ready to head into a new year.
Having a well-thought-out business plan is like having a roadmap to success. It can help paint a crystal clear picture of your business, what makes it unique, and why people should connect and buy from you.
If you’re asking yourself, “how do I make a business plan,” there are some things you should know, such as:
- Remember to put pen to paper and write it down
- Develop a clear timeline
- Determine what you want to accomplish
- Bring in your key people
- Put together a list of resources
- Define a clear profit target
- Measure your performance
As you’re developing your business plan, write it down. We’ve worked with owners who kept their plans in their heads, thinking it’s the best place to keep them. It’s not.
Your business plan, first and foremost, should be tangible. It must be written down, documented, and referred to months or years later. Your business plan is a blueprint that you and key members of your team use as a guide.
A business plan is supposed to be a living, breathing document that has to conform to its environment and evolve to meet the needs of your customer base and your employees.
If it’s inside your head, how can you measure it against your actual performance?
Start Writing it 4 Months in Advance
If your fiscal year ends in December, you should start putting together your plan between August and September. It awards you enough time to think and plan on the impact on your final quarter and lay the groundwork to make sure your next fiscal year starts off on a solid footing.
This means clearly understanding the successes and challenges of your current year, how it impacts your upcoming year, and forging a path of what to accomplish and how.
As we see it, if your business isn’t growing, pushing the envelope, thriving, and/or maximizing profit, then you’re regressing. Even worse, by not growing, you’re limiting opportunities for your employees.
Believe us, your competition is fighting the fight every day. They will not stop. They want to eat your lunch, take your business, absorb your market share, hire your best people, and steal your customers away.
So, should you start developing your business plan by looking at what your competitors are doing? We say no. There is no need to focus on the competition when you should focus on yourself.
“When it comes to my business, I don’t care what others do. I care about what we do.” Make this your mantra. Recognize your competition for what and who they are, and then put your best foot forward by pushing the envelope in your business.
Strategies to Approach your Business Plan
Have a Clear Timeline
Where do you want your business to be in three to five years? Once you’ve determined where you want to be, work it backward by year, quarter, and by month.
If you’d really like to get crazy with your new-year plan, break it down by week-to-week, and track yourself through milestones and flash reporting. Determine how well you’re doing versus your weekly, monthly, and annual plans.
Give yourself a couple weeks to write out everything you want to accomplish and a couple more to create a working draft.
Determine What You Want to Accomplish
Think about your business goals and what you want to accomplish. Jumpstart your business ideas by answering these questions:
- What value do you bring to the market?
- What problem do you solve that no one else can?
- Who is your target market?
- Why should buyers care?
- What’s your emotional resonance?
- What differentiates you from your competition?
- If you’re creating something new, what problem is it solving?
- Is your product or service “price sensitive?”
Determine how you might be affected by fuel increases, potential wage increases, interest rate hikes, union issues, potential recessions, tariffs, and more, and create a flexible plan to account for these changes. Be deliberate when conducting thorough market research.
Take some time planning for all possibilities. If you can’t dedicate an entire day doing this, use any spare time throughout the day to explore possibilities.
Reflect on it, make revisions, then have your accountant (CPA) or trusted advisor take a look to check for reasonableness. Remember not to over-complicate your plan.
Bring in Key Team Members
Define your guidelines and systems for accountability that will ensure you and your staff are executing and marching to the same drumbeat.
Search out thoughts and suggestions. Incorporate key people in the initial stages. Start by reviewing results versus last year’s plan.
If your key people–managers, department heads, etc.–aid in developing your plan, they’ll be more invested in it.
As the owner, you will need to steer the group’s direction, but by having a functional group that holds each other accountable, you will create a winning strategy.
But don’t bring in a group of people for the sake of working with a team. As the adage goes, ‘too many cooks can ruin a broth.’ Be deliberate about who you select.
Gather Resources
After you compile a list of what you want to accomplish, look at developing a plan of action. Ensure you have the capital to move forward and a strategy that will hit the ground running on the first day of your fiscal year.
Determine the financial, personnel (both internal and external), subs, vendors, equipment, and assets your business will rely on to succeed. Determine how you will retain, grow, and develop these resources.
Make sure you have two-to-three years of liquidity. You’ll make mistakes, which is an inherent part of the process.
When compiling your list of resources, try to answer these questions:
What are your financial resources?
If you think it will cost $100K to get started in the first year, do you have $300K to get you through the first three years?
What’s your intellectual property?
Who are the people who are going to support you internally and externally?
What equipment do you need to make your business a successful reality?
Set a Clear Profit Target
To set a clear profit target, calculate your costs. This includes the cost of goods or services, overhead, and any other expenses you incur in running your business. Once you know your costs, you can set a target revenue number that will allow you to reach your desired profit level.
Keep in mind that your profit target should be realistic and achievable. If it’s too high, you may struggle to reach it. On the other hand, if it’s too low, you may not be maximizing your potential earnings. Find a happy medium that gives you a challenging but achievable goal.
Again, you may want to discuss this with your CPA or trusted advisor.
Measure Performance
Keeping track of your progress throughout the year is a strategy often overlooked by business owners.
Too many owners track sales and cash balances and not key metrics.
Each department head should be accountable to the group.
Break your plan down into goals and milestones to determine where you should be annually, quarterly, monthly, weekly, and daily, and segment that by each department.
A few key metrics you should track to gauge your business’ performance are:
1. Revenue
Is your pipeline where it should be? Revenue at proper margins is the only way to ensure viability and profitability.
2. Customer Satisfaction
Happy customers are essential for any business. Track how satisfied your customers are with your product or service through reviews and surveys you facilitate and from third-party websites like Google and social media. Know your top accounts personally.
3. Employee Satisfaction
High employee morale is important to decrease turnover. Let your employees know that you’re invested in their development and offer opportunities for advancement. Show them that you value their work by offering regular feedback, both positive and constructive.
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These are just a few key metrics you may want to track. By tracking these three, you will be able to see how well your business performs and make necessary changes to improve its overall health.
If issues begin to rise, you can react much faster by knowing exactly what’s happening and which department it’s affecting.
Writing a Business Plan Doesn’t Have to be Hard
Your business can be successful without a business plan, and many would argue that it is no longer a necessary process.
In our experience, you may be sacrificing the full potential of your business without one, and you will be incapable of driving, achieving, and measuring your future results.
Take your time with creating a plan, but don’t turn it into the Bill of Rights or the Magna Carta. It doesn’t have to be long and unwieldy; the purpose of a business plan is for you and your key employees to use as a guide for the year. There’s no rule for how long a business plan should be; however, the more complex your business, the more complex the plan.
Make it detailed but also make it easy to read and follow.
As you develop this plan, just remember to follow and live by the KISS principle, or ‘keep it simple, stupid.’ Take the lessons you learned last year and apply them to the next. Don’t dwell on your mistakes. It’s how you perform versus your plan, not versus last year.
Free Business Planning Guide
If you need help with developing your plan, sign up to download our business planning guide to help you get started with putting your ideas to paper.
