Quick – what’s the first step to starting or growing a small business?
If your answer is create a business plan, you are absolutely….wrong.
With today’s rapidly-changing economy, the traditional business plan is now out dated and inefficient. In fact, faulty business plans are cited as the biggest reason that start-ups fail according to this Forbes.com infographic. 42% of start-ups fail because there’s no market need for their offering.
Which brings us to the first step in blowing up the ordinary business plan:
Adopt an entrepreneurial mindset to become a mad scientist
In a perfect world, you would come up with the greatest invention or idea and it would fly off the shelves.
In reality, people will only buy what solves a problem for them. Even the best ideas mean nothing if there’s no market for them. That said, you should treat the experience as a science experiment, and expect a few failed attempts in the beginning to get your business idea off the ground. Those failures, however, are necessary opportunities for you to keep molding your idea until it’s marketable and profitable. Wish you would have paid more attention in chemistry class, huh?
With your new entrepreneurial mindset, the way you think about shaping your business idea should change as well. We’ve established that people purchase what solves a problem for them, so your challenge is creating a business around a customer problem and to deliver an innovative solution for it. To do that, follow these steps in order:
- Select a general challenge area (i.e. health care)
- Identify the types of people or companies (including specific business units) that are impacted by or involved with this challenge area, and select one of these types to focus on (i.e. adults in their late 20’s)
- Create fake background information (name, income level, job title, etc.) on this type of customer – think of it as creating a movie character. More importantly, identify their most pressing concern, frustration, yearning as it relates to your challenge area. (i.e. John Doe, 28, lives in the city. Worried about his aging parents that live in a small town)
- Get a sense of why that problem exists by continually asking the question “why?” (i.e. He’s worried because other family members have moved away, and there aren’t many people to check in on his parents). These answers are the foundation for your business plan and can also double as marketing copy
- Now that you’ve identified your potential customers and their problem, you can use those answers to create your value proposition and differentiate your business from your competitors. People typically go through the day thinking about their most pressing needs. So, let’s restate the combination of the problem and why it exists into a sentence your user will understand by completing the sentence “My user needs a way to….” (i.e. make sure his parents are OK in real-time)
- With your customer need in mind, you can finally being to brainstorm on the features your product/service will use to deliver value to them.
Build your business case
Now is the time to start thinking next steps: what tasks and resources will you need for production? Who can you partner with to reach more customers? What will be your major expenses? This is also where you should start thinking about your business model and pricing strategy. Remember, people will buy what solves a problem for them. The bigger the problem, the more they’ll be willing to pay. Don’t short change yourself.
Test for actions, not words
Here’s where you bring your business idea to life by testing it out on actual customers. Note I used the word testing, because this is still a test. Remember, our entrepreneurial mindset tells us there will always be tweaks to our plan and approach, so we’re prepared to learn lessons and adapt quickly. You’re gauging the market by offering your solution and measuring how well your idea catches on, but your idea is only a success if people are actually buying from you. It will take you some time to accrue the insights you need to make further adjustments to your plan, but the idea is to build, measure and learn using as little resources as possible. Look for consistency in growth before you invest major resources.
Moral of the story
The best business plans are just that – plans. They sit on a shelf and collect dust. You should be focused on developing a model. There has to be room for failure and reconfiguration before success, but stay tenacious and trust the process!
Read more on the entrepreneurial mindset:
- How your business can rock the second half of 2021
- Boss your cash flow: 5 things to do right now
- 10 step to grow your customer base
- Small business survival toolkit
Editor’s note: This article was originally published September 2017 and has been updated for relevance.
Boss your finances
Take control of your finances with the reliability of desktop accounting software and the flexibility of the cloud. Enjoy less admin, more automation, and get paid faster with Sage 50cloud.
Business plan template
Thinking of starting a business? Or, looking for investment but need help putting a plan together?
Our free and easy-to-use business plan template can help.