To anyone that’s willing to listen, it’s apparent that there’s no shortage of good ideas for new businesses out there. However, most of them either never see the light of day or fail within the first two years. In both cases, the problem usually originates in the lack of a solid startup business plan.
Because it’s the first step to success, a robust and well-crafted plan is a vital part of setting up a successful business. To help you get a good grip of what creating a winning startup business plan entails, this guide will provide six incredibly effective tips.
1. Verify Market Viability
Before starting to map out a startup business plan, it’s vital that you make sure the market you’ll be targeting is viable. Simply put, this means verifying that the market is big enough to sustain your company and its products. Ideally, your target market should be big enough to support your company’s growth as well.
If the market is too small, it won’t provide the kind of income you need to make a profit. If your business plan includes a brick and mortar storefront, start by checking out similar businesses in the same area. Research potential customer demographics and use questionnaires and surveys to investigate the area’s consumer needs.
If your business plan involves an online startup model, you’ll need to survey a more substantial number of potential customers. However, the combination of the two can exponentially expand your potential target market. Check out the viability of both markets, to broaden your customer base.
2. Understand Your Audience and Market
Once you have determined there is market viability, get to know your potential customers. It’s vital to understand precisely what they want in order to adjust your product or service, guaranteeing your business will perform well once you open the doors.
Among the most critical aspects that you need to understand are the following:
- Market history
- Market accessibility
- Potential competition
- Market size
- Potential for growth
3. Know Your Competition and Recognize Opportunities
In every industry, some competitors may have already have an established presence and market share. A crucial part of creating a successful startup business plan is researching this competition.
Along with getting a better idea of how your potential market works, checking out competitors allows you to spot weaknesses in their business model. It also allows you to identify opportunities to outshine them and offer that vital difference that draws in new customers.
Identify what services or products your competition could provide, but isn’t. In this way, you’ll be able to offer this market a unique benefit that lets your business stand out.
4. Promote Customer Traction
Something that is often overlooked by entrepreneurs creating a startup business plan is tracking and promoting customer traction. The term refers to the momentum created by providing customers with opportunities to test a product or service and keeping track of the market reach.
When you give value to your customers, they’ll spend more money, engage with your business more frequently, and they’ll share word-of-mouth endorsements for your business with their friends.
If you’re looking for investors in the future, you’ll need to be able to track this information from the beginning of your startup. Customer traction is an abstract concept that looks at many different factors, and the metrics for tracking it can be as varied as time spent on your website to shares from your social media.
However, generally speaking, it can be as easy to measure as your sales data. Determine which metrics most reflect customer traction in your industry and make a plan to track them. Then, plan out ways to encourage and promote this engagement. They could be easy as providing customers with samples or offering incentives for social media shares.
5. Do the Math
Without a doubt, the core of any startup business plan is laying out the financial aspects. Tracking all costs as well as income is imperative. This step will result in a snapshot of your financial data that demonstrates what revenue and profit you can expect in the future.
Keeping track of this financial data will allow you to make adjustments to your budget and make plans for future income and expenses.
6. Write Down Key Information in Detail
It seems obvious, but the most critical part of setting up a startup business plan is writing everything down. Make a straightforward but thorough account of all the aspects that make up your business. Investors and loan officers expect to see your business plan in a standardized format, which includes the following information in the order presented.
This format encompasses all applicable areas of your business and makes for a detailed, and most of all, functional business startup plan
#1. Executive Summary
Your executive summary tells the story of your company: its current state, its goals, and its plan for future growth. It provides a present-day snapshot of your company for everyone involved, as well as anyone interested in investing in your startup.
Provide basic information, such as the date of incorporation, the names of owners/partners, the number of employees if any, and the company mission statement.
#2. Business Description
In your business description, you’ll go deeper into what your business offers to customers. Provide a summary of your company’s products and services, as well as a summary of any plans to broaden your offerings or expand into new markets.
For goods, include the production costs and intended sales prices for each unit. For services, estimate manhour costs vs. billing hours for frequently provided services.
#3. Industry Analysis
In this section, give a broad summary of the industry, in general, to help focus on the viability of the market and any economic factors that might affect it. Then, narrow down your analysis by area or market, using the data you gathered when you analyzed your competition.
Identify and document how your company intends to exploit any gaps in the current market and add details on how you plan to stand out among other businesses of the same type.
#4. Market Analysis
Using the surveys and questionnaires you collected earlier, summarize this information to describe your perfect customers. You can provide information regarding their demographics, including age, income, and educational level, as well as their geographic location if applicable.
Also, add any data that tracks the history of the size of this market, including credible projections about its potential growth.
#5. Marketing Plan
Once you’ve identified your target market and the current competition, you’ll be in a better position to create a marketing plan. Describe your product or services in this section, highlighting benefits, features, and the crucial differences between your product and others in the same industry.
Then, using this information and the information you gathered about your potential customers, document which channels you’ll use for getting the word out about your business. From the very beginning of putting together your business startup plan, start identifying the media your target market uses most frequently and make a detailed plan to employ it.
#6. Financial Plan
A financial plan for your startup business should include an accounting of the cash in hand as well as an honest assessment regarding the need for capital investment. Include your projected expenses and expected cash flow, along with any budget for growth.
With a startup, you may find yourself working on a shoestring. However, setting the tools in place to regularly document all business transactions will allow you to predict income and allocate profit in the future. On the financial end, this is the first step in putting together your business startup plan.
#7. Operations Plan
Your operations plan should cover the day-to-day workings of your business. This includes details like management structure and job descriptions. For a startup business, it may include such details as operating hours and open/close procedures.
Depending on the size of your startup business, you may also want to include hiring and promotion policies, an organizational chart, and a summary of compensation and benefits accorded to key personnel and partners.
Putting the Pieces Together to Create a Workable Business Startup Plan
Once you’ve read through and followed the steps above, you’ll have a very complete and comprehensive idea of how to create a winning startup business plan.
By being thorough, doing your research, and writing down every important aspect of your plan, you’ll have the bases when the time to take action comes. Updating this plan on an annual or semi-annual basis will also help you keep focused on your business goals. It can also serve as the basis for a complete financial plan when soliciting investors or talking to lenders.
Do you have any tips of your own for creating a business startup plan? Tell us all about it in the comments!