The Successful Business Plan

1. Craft a Business Plan for Success

In today's environment, a business plan is an entrepreneur's most crucial business document.

Essential tool. A well-conceived and presented business plan is no longer optional but essential for any company seeking to articulate its goals or secure financing. It serves as a roadmap, guiding entrepreneurs through the complexities of starting or expanding a business. Without a convincing plan, attracting serious consideration for your business idea becomes nearly impossible.

More than funding. The greatest beneficiary of a business plan is the entrepreneur themselves, as it helps in making crucial business decisions, understanding financial aspects, gathering industry and marketing information, anticipating obstacles, setting specific goals, and expanding in profitable directions. It's a tool for realizing dreams, not just pleasing others.

Comprehensive guide. This book serves as an interactive tool for busy entrepreneurs, providing a step-by-step process for preparing, writing, and implementing a business plan. It includes tips from experts, worksheets, sample plans, and reference materials to make the planning process easier, faster, and more thorough.

2. Understand Your Business and Market

Meeting needs is the basis of all business.

Meeting needs. The foundation of any successful business lies in addressing a real and important need or desire in the market. It's not enough to have a great idea; you must also have a market that is sufficiently large, accessible, and responsive. Market readiness is one of the most difficult aspects to measure, which is why market research is crucial.

Four elements. Successful businesses incorporate at least one of these elements:

• Something New: A new product, service, feature, or technology.
• Something Better: Improved service, lower prices, greater reliability, or increased convenience.
• An Underserved or New Market: An unaddressed niche market or unserved location.
• Increased Integration: Manufacturing and selling a product by the same company or offering more services in one location.

Market readiness. Even if you are not creating an entirely new product or service, you should attempt to determine if your market is ready for you. For instance, if you are opening a flower shop in a neighborhood where none currently exists, what indications are there that the neighborhood residents are interested in buying flowers? Do they currently purchase flowers at a nearby supermarket? Does the national demographic data on flower purchasers coincide with neighborhood demographics? Perhaps you should conduct a survey of the neighborhood's residents, asking about their flower-buying habits and preferences.

3. Industry Insight is Key

Your business does not operate in a vacuum; generally, your company is subject to the same conditions that affect your overall industry.

Industry-wide factors. Your company is subject to the same conditions that affect your overall industry. If consumer spending declines and retail industries as a whole suffer, there's a good chance your neighborhood boutique will also experience poor sales. As you develop your plan, you need to respond to the industry-wide factors that will affect your own company's performance.

Opportunities in trouble. While it is certainly possible to make money in an industry that is experiencing hard times, you can only do so if you make a conscious effort to position your company appropriately. For example, if you are in the construction business and the number of new-home starts is down, you may want to target the remodeling market rather than the new-home construction market.

Reassure investors. If you are seeking outside funds, your business plan must reassure investors or bankers that you understand the industry factors affecting your company's health and that you have taken those factors into consideration when developing your business strategy.

4. Target Your Ideal Customer

It's easier to get a piece of an existing market than it is to create a new one.

Customer understanding. Essential to business success is a thorough understanding of your customers. If you don't know who your customers are, how will you be able to assess whether you are meeting their needs? Since success depends on your being able to meet customers' needs and desires, you must know who your customers are, what they want, where they live, and what they can afford.

Market-driven approach. Investors look for companies that are market-driven, whose orientation is shaped by the demands and trends of the marketplace rather than the inherent characteristics of a particular product or service. Being attuned to your market may cause you to make changes in your advertising, packaging, location, sales structure, even the features and character of the product or service itself.

Defining the market. You may be tempted to describe your market in the broadest possible terms, choosing to include all those who might potentially use your product or service. Instead you need to identify the particular market segments you wish to reach. These segments describe distinct, meaningful components of the overall market and give you a set of specific characteristics by which to identify your target market.

5. Know Your Competition

It is not enough just to build a better mousetrap; you have to build a better mousetrap company.

Competitive awareness. It is imperative to see who's gaining on you. It is far better to know what you're up against than to be surprised when your sales suddenly disappear to an unexpected competitor. Every business has competition. Those currently operating a company are all too aware of the many competitors for a customer's dollar.

Competitive advantages. Honestly evaluating your competition will help you better understand your own product or service better and give investors a reassuring sense of your company's strengths. It enables you to know how best to distinguish your company in the customer's eyes, and it points to opportunities in the market.

Customer perception. The objective features of your product or service may be a relatively small part of the competitive picture. In fact, all the components of customer preference, including price, service, and location, are only half of the competitive analysis. The other half of the equation is examining the internal strength of your competitors' companies.

6. Develop a Winning Marketing Strategy

Tell them what they get, not what you do.

Reaching customers. If you can't reach customers, you can't stay in business: It's the most basic business truth. That's why an effective marketing plan to contact and motivate customers is vital for your business success. Because reaching customers costs money, and money is always limited, your marketing strategy must be carefully and thoughtfully designed.

Marketing vs. Sales. Marketing is designed to increase customer awareness and deliver a message; sales is the direct action taken to solicit and procure customer orders. Thus, marketing includes activities such as advertising, using brochures, and public relations; sales encompasses telemarketing, sales calls, and direct-mail solicitations.

The Five F's. Traditional marketing experts emphasize the "Four P's" (Product, Price, Place, Promotion), but customers are more concerned about how a purchase will affect their lives. The "Five F's" (Functions, Finances, Freedom, Feelings, Future) are a convenient way to sum up what customers want.

7. Streamline Operations for Efficiency

Ninety percent of success comes from properly executing the fundamentals.

Operational excellence. The Operations section of your business plan is where you begin to explain the day-to-day functions of your company. This is where you translate your theories into practice. These seem like the kind of details that take care of themselves. But there's a far greater chance that a business will fail because fundamentals aren't handled properly than because the basic business concept is faulty.

Key areas. In your Operations section, focus on facilities, production processes, equipment, labor force utilization, cost and time efficiencies, and problems addressed and overcome. The aim is to show that you have a firm grasp on the operational necessities of carrying out your business, that you understand how those operations relate to your overall business success, and that you have taken steps to achieve maximum efficiency at the least cost.

Inventory control. Every piece of raw material or finished good waiting in a warehouse ties up capital, making it unavailable for more productive uses. You must minimize your inventory levels. At the same time, there are also costs associated with having too little inventory. Without materials, you may have employees unable to do their jobs; without finished products, you may not be able to fill orders.

8. Build a Strong Management Team

No matter what you sell, you're selling your people.

People are key. People are the heart of every business. Overwhelmingly, the quality of the people determines the success of the business. Many investors base their investment choices almost entirely on the strength of the people involved in the enterprise. They know that the experience, skills, and personalities of the management team have a greater impact on the long-term fortunes of a company than the product or service provided.

Management assessment. In looking at these key players, ask yourself:

• Do they possess the skills necessary for their specific jobs?
• Do they have a record of success?
• Have their business setbacks given them insights that will help them in their current roles?
• Do their personalities make them effective members of the team?
• If they have supervisory responsibility, are they able to direct and motivate employees effectively?
• Taken as a whole, does your team incorporate the full range of expertise and management skills you require?

Compensation and incentives. You also want to give a brief idea of the status of your company in financial and personnel terms. For example, how you have been funded to date and any major financial obligations. If seeking funding, briefly indicate how much money is sought and for what purpose. You will expand on your financial obligations and use of funds sought in the Financials section of your plan.

9. Plan for Long-Term Growth and Exit

You can't reach a goal you haven't set.

Long-term vision. If a business plan serves as a road map for your company, then to use it properly you need a sense of your ultimate destination. What do you want your business to look like in three, five, or seven years? You can't hope to just stumble across success; you have to figure out how to get there.

Milestones. In the daily press of business, it can often seem that you're making no progress at all. At any given time, you'll have a stack of bills to pay, troublesome customers, and problems with your staff. So you need a reminder that you have, in fact, been going forward. A milestone list allows you and your financing sources to see just how much you've accomplished, and it sets out clearly delineated objectives.

Exit strategy. Investors want to see what they are getting in return. They know how much money they can lose — the downside risk. But they also want to gauge what they might gain, how big the company might become — the upside reward.

10. Secure Funding and Resources

It's not just what you've got; it's what you do with what you've got.

Funding sources. Not all money is equal. When you first start to look for financing, you imagine that you'll take any money you can find, but you should exercise care. The various sources of money require different types of return on their investments, have varying levels of sophistication and comfort, and provide you with significantly different auxiliary benefits and disadvantages.

Debt vs. Equity. Funders either want their money paid back with interest or they want to participate in the profits your company eventually makes. There are two basic formulations for financing your business: taking on debt or giving up equity (ownership interest) in return for investment income.

Research recipients. It pays to do a little homework on your potential recipients so that you understand the nature of the investments or loans they make. It's a waste of everyone's time to send a business plan for your service business to a venture capital firm that funds only manufacturing companies, or to submit a loan for your new business to a bank that only funds companies established for more than three years.

11. Adapt and Evolve Your Plan

Planning isn't just what you do to go into business; it's what you have to do to stay in business.

Ongoing process. Internal planning is a must for any business; it enables you to stay competitive. A thorough planning process forces you to look closely at the dynamics of the current market situation rather than rely on old assumptions.

Periodic review. To make your business plan a meaningful working document, schedule periodic evaluation meetings to get back in touch with the plan. Perhaps once a month at a staff meeting, the plan can be reviewed and progress assessed. At the very least, the plan should be reviewed quarterly with both management and staff participating in the evaluation.

Stay current. Your quest for financing may take many months, and your plans for your company may change during that time, especially if yours is a new enterprise. You want to make certain that your written plan is always reasonably current with your actual business strategy and position.

Last updated: March 11, 2025