You want to make a living on your own terms. That’s why you’re planning on starting a business, right? As the author of several dozen business plans, two of which have worked out, I can tell you that you’re probably too focused on the wrong thing: money.
The paradox is that you want to start the business to replace your income or to monetize one of your passions, but thinking about money at the outset is what will sink your efforts. For the plan to work it needs to emphasize the things that lead to money.
Values Must Come First
A business is something that adds value to the community. That could be monetary value if you’re looking to start a bank, but most of the time we’re talking about values that help you stand out from the rest of your industry. Things like:
- Meeting every customer’s needs, no matter how difficult.
- Creating the absolute best product.
- Guaranteeing your service.
- Innovating improvements to services or products.
- …anything that makes you stand out from others in your industry.
You might imagine that what you’re providing for your customers is a product, but they can almost always find a similar product on the market, and often for less money. What you are providing are your values.
Forget the Mission Statement (For Now)
Let me be clear: mission statements are super important, but not yet. We’ll get to that a little later.
One caveat: some businesses start with a vision that establishes the mission statement before you even think about product acquisitions. If this is the case, write it down. Otherwise, please continue…
Double Down on Your Market Position
The primary element of your business, one might even call it a value, defines your market position.
You must be the first, the best, or the most innovative.Brad Hannon
Knowing which position you are in is far more important than pretending to know your first-quarter earnings on a product or service you’ve never rolled out before.
If you’re the first…well, being Microsoft must feel pretty damned cool. There aren’t that many firsts, so enjoy your time in the sun. Just make sure an Apple is rolling up behind you with a better product.
If you’re the best, you’re Apple. You saw how the first few businesses tried it, and you figured out how to put out a better product, or at least better marketing for that product. Apple‘s marketing message during the 2000s was second to none: “cool millennials use Macs; stuffy old businessmen use Microsoft. You want to be cool, right?”
If you’re the most innovative, you just changed the world with the first smartphone. This wasn’t the iPhone (that was another example of Apple being the best). Nokia had a cellphone in 1996 that could access the mobile web — an innovation at the time. Later, Apple and Samsung pushed Nokia out as the most innovative, by turning smartphones into smart tablets and allowing users more interface customization.
You may not have a clear understanding of your market position right away, but you need to go in with something in mind. You need a target to aim at.
Plan Three to Six Months Out
Five years ago, did you think you’d be where you are right now? Then what good are five-year plans?
Be realistic: plan for the next six months. I would say only plan for the next quarter but if you’re just starting out, your first quarter will be focused on early infrastructure. Or maybe not. It depends on how much set up your business needs.
Regardless, have a quarter’s worth of sales goals, marketing, and the building of some good old sweat equity in your business plan.
Reevaluate After Six Months
Or the first quarter (see above).
This is where you can create your mission statement and start to think about money.
Because now you’ve had time to find out if your early ideas about your market placement are accurate. Maybe you set out to be innovative, but instead, your customer-oriented outlook turned you into the best in a niche area of your market. If you had planned your mission statement around being innovative, you will have a hard time breaking from that identity and moving forward when the real world looks a bit different from what you dreamed up.
You can also start thinking about money at this point because you’ve made some of it. You know what your costs are (and there are always some you never dreamed of, like employment taxes…ouch!). You also know enough to start thinking about profit margins. If you’re not making much, increase your prices. If you’re making more than you thought, start investing in infrastructure.
Up until this six-month reevaluation, you should only be thinking about money and looking at your income to ensure that you’re not operating in the red. Sometimes, six months will be enough to start looking ahead. Usually, it’ll be the sweet spot where you can see the future, but you still aren’t making much, yet.
Now, after you have six months under your belt, write up another business plan incorporating everything you’ve learned up until now: money, marketing strategy, mission statement…everything.
You’re ready for the real business plan.