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Anyone who has ever heard me speak on television, or who has attended one of my classes, knows I'm passionate about good business analysis and relevant research. I think good business owners find out what customers want, build products and services that meet customer needs, accurately model the business they are running and carefully monitor and control their capital requirements. I think this behaviour reduces unpleasant and expensive surprises. It may come as a surprise to hear, therefore, that I'm not a fan of iron-clad business plans that owners and management teams follow to the bitter end.
Why? Because business plans are most often written before a company is successful, and often before it is in business. They are written in hopeful ignorance and are based on best guesses. Business plans serve a useful purpose once a business is making money and raising revenue, but they have a very limited usefulness, if any at all, before a business is up to speed.
If you are just starting your business, or have a business that seems to be less than wildly successful, start your business planning as follows:
- Identify your customers and their needs.
- Identify the products and/or services you will provide to meet these needs.
- Identify how people will learn about your products and services.
- Identify how and where they will pay you for your products and services.
- Identify who will help you to achieve these objectives.
Forcing yourself to come up with answers to these basic questions early on defines a "business model", a working hypothesis about how your business will make money, that you can begin to test. All your business operations, until your business is fully profitable, will really be attempts to test and refine this business model.
You will start by contacting the customers you can reach. You will begin by exploring their needs. You will derive a product that meets those needs using a process of successive approximation. If your business is based on an innovation, a new technology for example, you will work to find out how the technology can best serve your customers. You will determine a price, a way to promote the products, a way to deliver the products and a team to help you do it all.
And, frankly, you will almost certainly discover that the business you build looks nothing like you thought it would. This is more often the case than not. Having a hypothesis to start from, a well researched, carefully considered starting point from which to set off, gives you the freedom to fully explore where you and the market disagree about what your customers need and what your company should do.
You can then, with careful consideration, decide to do exactly what the market thinks you should.
Need Help Creating Your Business Model?
The School for Startups "Start & Growing a Successful Business" Course and our new "Build Your Business Now Toolkit" are designed to help you learn how to build and implement a profitable business models quickly. Learn more about them on www.schoolforstartups.co.uk.
We offer new online and face to face events for UK entrepreneurs every month. Follow us on Twitter at @s4s to learn more about them.
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