The other night we were talking with a group of young people when one person said that she wasn’t able to start a business because she couldn’t qualify for a loan. As you can imagine, several of us chimed in that we didn’t have funding either when we started our businesses.
Of course some businesses require funding, and we understand that. Capital-intensive industries, for instance, require a large up-front investment to get off the ground. However, if you have an entrepreneurial spirit, a modicum of talent and a lot of drive, you can start a business without funding.
To back this up, we conducted a quick search and found dozens of articles with low or no-cost business ideas. We particularly liked one from Small Business Trends that lists 25 businesses that you can start for less than $100.
That said, some business ventures fall somewhere in the middle. They need some funding. And, to be truthful, we ourselves needed to live on savings for several months until we built up a clientele in our consulting businesses that supported our lifestyle.
If you plan to rack-up credit card debt or tap your 401(k) to fund your own dreams, you should fully understand what you are getting into. And a robust business plan is an important element. There are many free templates available. Find one you like and use it.
Below are several questions your business plan must address. We caution you to be brutally honest. If your idea isn’t going to fly, it’s best to come to grips with this reality now rather than after you’ve invested your life savings in the venture.
Download: Free Business Plan Template Download
The questions you should answer are:
1What differentiates your product?
We assume that your product fulfills a want, need or desire. If it doesn’t, rethink your plans. Sometimes the market doesn’t know it needs your product – and that’s fine. Henry Ford famously said, “If I had asked them what they wanted, they’d have told me faster horses.”
The first step is to identify the need your product will fulfill. Then determine whether or not this need is currently being met and if so, how and by whom? The first question we always ask clients is, “Why should a prospective customer buy your product rather than a competitor’s?” If you can’t answer this question clearly, concisely and definitively, go back to the drawing board.
2Is there a large enough segment of the market that will value this difference?
Identify the segment of the market that values whatever it is that differentiates your product. Estimate the size of the market segment. Now, reduce the size of this segment by the percentage of people who won’t be willing to pay what you will have to charge to make your business profitable.
Can you still reasonably project enough volume to make your business economically viable?
Related: Business Plan Format Guide
3Is the thing that differentiates your product defensible?
If your idea is a good one, you had better know how you will keep a large competitor with deep pockets from copying it and running you out of the market. There are many examples of well-healed copycats overtaking people with good ideas.
You need a plan to protect yourself from this. Perhaps you can protect your intellectual property through a patent. Perhaps your idea, for one reason or another, is difficult to copy. What entry barriers are there to keep the competition from moving in?
4How will you reach the target customer segment with your marketing message cost effectively?
Whoever said, “If you build a better mousetrap, the world will beat a path to your door,” was simply wrong. If the world doesn’t know you have a better mousetrap, no one will come knocking.
Make sure you are clear regarding how you will reach your target customer segment with your marketing message. You need to have a clear plan for cost effectively acquiring customers. A marketing cost per acquired customer of $50 is no good if you make only $40 on each new customer.
5How can you prove the viability of your idea quickly and inexpensively?
If you are afraid that you will need a big investment to launch your product, find a way to challenge that assumption. There may be ways to prove the viability of your concept without making the full investment. Ideas include outsourcing manufacturing or making version 1.0 by hand rather than buying expensive equipment.
Another? Launch in a limited geography. For instance, we have been working with a company that is developing an app for the property-management industry. We started by working with several local property management companies to prove the concept and work through some challenges. Now, we are rolling out to other geographies.
Chances are good that the initial version of your product will fail – most do. Our advice is to fail fast and fail cheap. Launch as inexpensively as possible. Learn from the market’s reaction. Make the necessary changes.
As happened with the app company, prove that your concept will be successful before you invest in a full roll-out. You may even need to sell the initial units for less than they cost to make. We sold that app to the first users for a greatly reduced charge.
6What will your cash flow look like?
Make sure that you build a thorough financial model that supports your decision to move forward. We encourage very conservative assumptions.
New products often take much longer and cost much more to launch than you would think. Unless you have a lot of experience launching new products, the estimates you consider accurate will almost certainly be aggressive. If the economics of your product don’t look good with very conservative assumptions, you may want to rethink things.
Launching a new venture can be exciting and rewarding. It can also be fraught with risk. Honestly answering these six questions will help you make decisions that are more informed.
This article was originally posted here on Entrepreneur.com.
The Future Of The Business Plan
When things get rocky, what will keep you on point and on mission? What can you refer to, ensuring you aren’t straying from your original vision? The right business plan can go a long way.
Business plans are a lot like maps and GPSes. If the organisational journey is proceeding smoothly, you may believe you don’t need one. Indeed, there’s a school of thought — backed by certain research — that says starting out with a formal plan is no predictor of success and it’s better to get out there and test your concept in a real-world environment.
These naysayers argue that most business plans are theoretical, unrealistic and go out the window the first time the entrepreneur encounters an unforeseen hurdle.
Refer to the original vision
But the pro-business plan lobby argues that, when market conditions unexpectedly change and you’re thrown into disarray, it’s important to refer to the original vision and belief system that you started out with. These will help to keep you grounded and avoid going off at tangents every time you hit an obstacle.
A plan also helps to prioritise your daily activities. Without it, everything becomes urgent and the resulting chaos will destroy your work/life balance and leave you feeling overwhelmed. If you are more than a one-person operation, a business plan enables company teams to align their activities to the overall vision and to work congruently to achieve the same goals.
William B. Gartner, an entrepreneurship professor at Clemson University in the US, believes business plans are essential. After analysing data from a survey of more than 800 people starting businesses, he found that writing a plan greatly increased the chances of actually going into business.
“You’re two-and-a-half times more likely to get into business,” he observes. “That’s powerful.”
Alyssa Gregory, an entrepreneur and writer for the likes of Forbes and the New York Times, says the process of putting together a business plan can help with new ideas, different approaches and fresh perspectives.
“An effective business plan is a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges,” she says.
Related: Business Plan Format Guide
Keep the plan simple
However, the thinking around the required depth and complexity of a business plan has changed. A decade or two ago, management gurus advocated elaborate 40-page plans with detailed sections covering objectives, mission, organisational structure, target market, customer behaviour, competitive advantage, marketing strategy, sales forecasts and financial projections.
These days, unless you’re seeking outside investors or looking for a bank loan that requires a detailed risk analysis, the move is towards shorter and simpler documents of no more than a page. The reasons for this change are many. A lengthy document is likely to be unread — particularly by younger-generation employees with short attention spans. Even if it is read, it’s unlikely to be remembered in detail because of its complexity.
So, opt for a one-page business plan that’s easily digestible and lists only the important things like mission, vision, etc. Cut the fluff and keep the essence. If you’ve spent time preparing a longer plan, that’s okay. Turn the key elements that will keep you focused on your goals and the bigger picture into short bullet points that will become your go-to business plan for regular use.
What should be in your one-pager? South Africa-based digital marketing and content strategist, Casandra Visser, suggests:
- Vision – What are you building
- Mission Statement – What you do, what your product/service is and who your customers are
- Objectives – Your business goals for the next week, month or year
- Strategies – How you plan to achieve your objectives
- Action Plan – Steps you will take to action your strategies, including dates/deadlines.
Finally, remember that your plan is a living, breathing document that needs to be meaningful in a constantly changing business environment. So, break up your annual plan into quarterly plans that take into account micro and macro changes in your specific operating environment.
Keep it relevant, keep it simple — and your business plan will be an invaluable asset in navigating your business journey.
Questions To Consider While Testing The Success Rate Of Your Business Plan
Here are four ways to test your plan’s success rate or you may instead take these as questions to validate your business idea’s credibility.
So you’re finally ready to craft your business ideas out of your head and wondering if the plans you have made are worth hitting the success road or not. Well, this is something that stands as a matter of concern for every budding entrepreneur. Also, checking the viability of your business plan is necessary. For this reason, the online evaluations are turning out to be handy.
Creating tests online to assess your business plan has become a norm these days. You may find several testing tools with ready-to-use quizzes/tests to help entrepreneurs in interpreting results for developing a successful business plan. So before you take the plunge and give your business a shoot, here are four ways to test your plan’s success rate or you may instead take these as questions to validate your business idea’s credibility.
Answer these 4 Questions to test your business plan’s success:
1. Did you assess your target audience/market?
A crucial element of a successful business plan is making an appropriate market analysis and identifying your target customers.
- Whom are you selling your product/service to?
- What are their demands and requirements?
- How big is the market you shall step in?
- What can you do to launch your business in the market?
An open interaction with your target audience in the form of social media polls, surveys, etc., can help you find answers to the above questions. If your business plan includes all of these necessities, then you have successfully crossed the first milestone.
Related: Business Plan Format Guide
2. Have you made a check of your funding?
What do you need to kick-start your business? Idea, passion, and more importantly ‘MONEY.’ Your business plan should help you identify potential funding sources for your start-up. These sources may include spending your savings, taking loans or sometimes a combination of both. Studies by the University of Oregon say that businesses with a proper plan are more likely to get funded. Therefore, consider making an effective business plan to enhance the chances of getting funds.
3. Did you roll your eyes on the competition in the market?
Analysing your competitors and making a note of their strategies is something that will help you nurture your business. This doesn’t mean that you spend all of your time and energy in eyeing the competition. You need to gather all the tricks implemented by successful entrepreneurs and keep an eye on the factors that lead to failed startups. If your business plan structures key points you take from the competitive market around you, then you have bagged the next milestone in this journey.
4. Have you made a marketing strategy?
Would you like your business to stay stagnated? Obviously not! How you market your product/service to reach your target audience must be included in your business plan. If your business plan gives you a clear picture of when and how you will advertise your product through social media, websites, etc., then you ultimately succeed in creating a full-fledged business plan.
The online test maker software these days has made it extremely convenient to create tests judging the success rate of a business plan. According to a recent study, businesses with an adequately devised plan tend to grow 30% faster. Looking at this number, we can precisely estimate the importance of having a full-proof business plan that includes all of the points as mentioned above. So don’t forget to test your plan before you take the huge leap.
Why Your Business Beliefs Are More Important Than Your Business Plan
Your business plan will change. Your business beliefs should lead you to long-term success.
Do not spend more time working on your business plan than you do actually working on your business. A business plan is important, and you should take the time to make one. Just know that your beliefs about business will have a much greater impact on your success than what you put on paper.
I know this because I’ve coached dozens of entrepreneurs and business owners from the very beginnings of their businesses. I’ve watched some of them grow their businesses all the way to six-, seven- and even eight-figure earnings, even when their initial idea looked shaky on paper.
I’ve watched others struggle for years before giving up, even though their ideas looked foolproof on paper.
The short explanation here is that what you put on paper for a business plan will never match reality. Never. As soon as you start selling to and working with real people, things change. There’s a certain amount of chaos. However, there is a way to harness that chaos and use it to build your empire, which is what I’m here to show you today.
Innovation is moving faster than ever before
In the next five to 10 years, most of the jobs that exist today will be replaced by AI. For entrepreneurs, that means your business operations will be cheaper and more reliable than ever before. However, it also means that your daily operations will look completely different than what they look like today.
Plus, many of these technologies will have unintended consequences. They’re going to create problems that we’ve never had to deal with before (such as high unemployment).
I don’t say any of that to scare you. In fact, I’m extremely optimistic about the future, and you should be, too. My point is that none of us can afford to get stuck on how we do business today.
If your idea of success is to find the next “hack” or “quick fix,” then you’re going to be sorely disappointed. Those hacks and quick fixes are going to become outdated almost as soon as they appear.
So, here’s what you need to do instead: Become obsessed with the principles of wealth and success, not just the delivery system. Study the entrepreneurs and the businesses you admire most and look for the principles that guided their decisions.
Focus on principles, not quick hacks
The most successful entrepreneurs on the planet are the ones that put in decades of hard work to build their empires. That means that they kept their businesses growing even in times of massive uncertainty, loss and change. How?
It comes back to their business beliefs, which is another way of saying principles. If your business beliefs are solid, you will quickly find a way to create new solutions when the old systems for doing business break down. For a great example of this, look at Ray Dalio. He’s been listed as one of the 100 wealthiest people in the world, and he even wrote a book called Principles.
He’s also the founder of the investment firm Bridgewater Associates, which has a fund called the Pure Alpha fund that only lost money three times in the last 20 years. Keep in mind, that includes the 2008 housing crisis, which was the worst economic downturn in recent history. When most people were suffering financial disaster, Dalio and others like him kept their empires growing.
Again, it goes back to beliefs, aka principles. One of Dalio’s core beliefs was that he could design an investment portfolio that would remain safe and keep growing under any economic season. Through years of researching and testing, he created the All Seasons portfolio and accomplished just that. And he accomplished that because he was looking for the principles that would keep his money growing over the long term instead of get-rich-quick tricks and hacks.
Another great example is Google. Google’s mission statement is “Organize the world’s information and make it universally accessible and useful.” That’s not a hack or a get-rich-quick scheme.
That’s a guiding belief in what’s possible. It’s a huge idea that serves the needs of people all over the world. That’s what has allowed Google to create billion-dollar solutions and rewrite how much of the world operates today.
Beliefs can make you mentally strong — or weak
Let’s bring this back down to a personal level. If you believe that you have the creativity, focus and discipline to solve any problem that comes up in your business, then that will come true. On the other hand, if you believe there’s no room left for your ideas, or that you’ll never be able to lead other people toward your vision, that will also come true.
With that in mind, let me offer you a set of beliefs that have helped me succeed in business. These are not beliefs I pulled out of thin air. These are beliefs I’ve seen in action with dozens of other successful entrepreneurs.
I’ve tested them out in my own life and found that they each helped my businesses grow faster. I encourage you to read these aloud to yourself until they become habits in your own thinking.
- Money is attracted to decisiveness, action-taking and speed.
- I can learn whatever new skills I need to succeed and keep my business on the cutting edge.
- I can earn the respect and cooperation of anyone whose help I need.
Now, you might be wondering if I’m preaching some kind of woo-woo, “law of attraction” stuff here. I’m not. If you read those beliefs again carefully, you’ll see that they emphasize taking action. They emphasize going above and beyond what most people are willing to do.
The whole point of this is to prime yourself to want to take these actions even when they are uncomfortable. You will do this because you believe that the rewards will come. No, the rewards will not come immediately. Yes, the reality will be a long and difficult road.
Related: The Power of Dominant Thought
That’s precisely why you need deeply held, empowering beliefs to push you forward even when your plan falls apart. Focus on developing your core beliefs, and you will have the power to overcome any challenge on the path to empire.
This article was originally posted here on Entrepreneur.com.