Have a Plan - Here's How (Fundamentals of Business #4)
Last time we talked about the reasons to have a plan before you start your new business venture. But what does planning actually look like?
A good business plan is going to have two components -- written and numerical. We want to be able to both explain what is going to happen and quantify the results we are expecting. The narrative will help you formalize your thoughts and have a big picture game plan, while the numbers will allow you to budget for major expenses in the business, and to budget for your personal life as well.
Here’s what this the planning process might look like:
Define success. What does your successful business look like three years from the start? If you can determine that, you can use that image and work backwards at all the things that need to happen to get you there. Write them out - take the concept and make it into a series of items that are specific enough for you to take action. Avoid excess business jargon - it needs to be in the language you use in your own head, so that you can try to abide by it.
Imagine what the first day, month, and year look like. When you get started, what are the most important things for you to be doing? Do you need to talk to existing clients and vendors from a business you are acquiring? Is it to market and pound the pavement to find new customers? Or do you need to work on your team and build up people to help you? You need to figure out which of these is the most important and how to do it. The scope of the task will change based off the different time horizons, but you need to consider what it looks like at all these different stages.
Bind it all together. These first two steps look at the business going backwards from success and forwards from inception. Now glue the two pieces together. Look for gaps on how you are going to get from Day 1 to Day 1095, and figure out how to make everything work cohesively. Re-read your plan to make sure it is coherent. You can even read it aloud, to yourself; this will often trigger the brain to find things that don’t make sense.
Fill out a hypothetical income statement. You need to be able to translate all this into numbers -- revenue, expenses, your withdrawals from the business. Get an income statement template and start working to fill it out. Don’t guess on the big things; while it’s not necessary to quantify how many pens you’re going to buy, you can’t just make up a number for gross revenue and have an effective plan. You need to know what makes up your revenue -- how many customers spending how much money on what products or services -- and the same for your expenses. The point of the hypothetical income statement is to make you think through all of these items and really consider how you will get that revenue and keep your expenses within those bounds.
These aren’t simple steps. This process will really require you to delve into what you’re going to need to do to achieve your goals and what the financial result of that success will be. If you need guidance, templates, or just someone to talk to, please feel free to talk to us. This is what we do.