I strongly suspect that despite all the time spent on preparing a business plan, in most instances it ends up in a drawer or filing cabinet, and very rarely referred to.
The thought processes and research you do as you go through the exercise of preparing your plan are very valuable. So how do you turn your business plan into a tool that you can use daily to maximize the benefit to your business?
I believe the answer is 2-fold: develop a yearly one-page business plan, and supplement that with 90-day sprints where you focus on tracking your goals.
As we reflected in another recent article, a business plan is usually a comprehensive, multi-page document. It also has a time frame spanning multiple years.
From my experience, it can be hard to focus when you are looking out into the distance, and I am a strong advocate of creating a tool that helps you focus on getting to your destination.
A one-page business plan is a document that summarizes the key components of your yearly plan on a single page. You can look at it at any time to quickly remind yourself of the keys to achieve your business goals for the year.
Let’s explore the components of your 1-page plan. And by the way, if you have created a comprehensive business plan, you are not reinventing the wheel, as the components of this document will be pulled from the original plan, albeit with a reflection on whether anything has changed in the meantime or applies in the shorter term.
Start with the purpose of your business.
What is your vision and mission? This will be a constant reminder of why you got into business, to motivate you as well as keep you on track when things get tough.
Your vision can be defined as your end goal, and your mission is a summary of how you are going to get there.
Let’s look at Starbucks as an example.
Starbucks Vision Statement: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
Starbucks Mission Statement: “Establish Starbucks as the premier purveyor the finest coffee in the world while maintaining our uncompromising principles while we grow.”
Your vision should be a short statement that reflects your big ‘why’. Your mission statement may be a bit longer but keep it as short as possible.
Your vision and mission are something that everyone on your team should know.
In this section you are going to outline who you are marketing to and why people you buy from you.
Identify your target market. This should be a narrowly defined market. For example, if you are selling tools to help work-at-home moms, you would not want to market to other business owners. So, instead of ‘business owners’, your target market might be ‘work-from-home moms in the western suburbs’.
Your marketing will be more focused and effective when you have greater clarity around who your ideal customer is, along with their mindset, attitudes and buying behaviors.
If your target market is ‘work-from-home moms in the western suburbs’, your ideal customer avatar might be: ‘Her name is Meghan and she is 30 years of age, a single parent with 2 school age children, environmentally conscious and makes buying decisions based on internet research and product reviews’.
What makes you different from your competitors? This is called your Unique Selling Proposition or USP. It is your competitive advantage and the key reason why a prospect should buy your products or services instead of those of your competitors.
An example for a local gifts store might be ‘our products are hand-crafted and made locally from sustainable resources’.
Next, we consider your key marketing and sales strategies.
A benefit of having an ideal customer avatar is that you will focus your promotional efforts around your avatar. For example, if they spend time on specific social media then you can focus on social media promotions. If they research using the internet, then your strategies would include Search Engine Optimization and maybe ‘how to’ videos on YouTube. If they are community minded, they may include community group involvement and so on.
Word-of-mouth is basically free advertising that happens when a happy customer refers you to their friends and colleagues. This is very powerful because people trust an honest recommendation more than advertising and even reviews and testimonials from people they do not know.
Word-of-mouth recommendations can happen organically, but it is a known fact that people tell a lot more people when they are dissatisfied than when they are delighted with a business.
There are a number of ways to generate word-of-mouth referrals.
One example we used in our business was to provide a referral coupon with every sale. When a new customer presented the coupon at purchase, both that person and the customer that referred them were entered into a draw to win a prize.
I have also seen businesses run a contest where customers use their products in an entertaining way in home-made videos.
If nothing else, simply ask your customers for referrals if they are delighted with your products and service.
To fulfill your plan for the year, you must keep your eye on the major goals and track our progress. Each goal will have an action plan, and I recommend a supplementary 90-day plan that brings these goals and action plans into shorter term focus. But for your one-page annual business plan, you want to be able to quickly see what the primary goals are, how to measure them and when they are due to be completed.
List your top 3 goals. An example might be to increase sales conversions to 40%. Another might be to launch a new subscription based ongoing maintenance service.
Goals must be measurable. How do you measure this goal? In our example of increasing sales conversions, the measure would be the number of sales divided by the number of enquiries. With our second example, the measure is whether it has launched or not. (The action steps to bring this to fruition would also have measures.)
Record the date for each of these goals to be completed.
It is important to regularly track your business finances. This includes income, costs and cash flow. In this section of the plan, we highlight the key indicators of financial performance of the business.
What is your revenue target for the year? In setting this you will have analyzed what the business needs to provide to meet costs, provide for investment along with personal needs along with a return on investment. Highlight what that revenue target is.
Every business has metrics that are key to financial success.
For example, your Gross Profit Margin is the amount of gross profit (Sales – Cost of Goods Sold) divided by Sales. Small changes in the gross profit margin can have a significant effect on your net profit.
Similarly, how much net profit do you make from each dollar of income? Calculate this by dividing your net profit (sales – all costs) by total sales.
Various businesses have other key metrics that are important. For example, in hospitality, another key ratio is wages divided by sales.
Pick the key metrics for your business and include them in your plan so that you can monitors them regularly.
Check out the section on ‘Analyzing Your Finances’ at https://selfemployedbusinessacademy.com/manifesto-administration-finance/ for more assistance with your key metrics.
In conclusion, your business plan should be a key management tool for your business. You can make this happen by creating a single page annual plan that helps you focus on the keys to making your business successful. Review this every month to see whether you are on track. Adjust it when you need to and support it with a regular review of your goals and action plans.
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