By Hector Hurtado
“I know right!?” was the answer I received from my then client when I asked the question used for the title of this blog entry! To my dismay, this was real, while this is the norm for quite a bit of start-ups and mom and pop shops that stayed that way in spite of incredible growth, we are talking about a company that was already at 2.4 million USD annually!
So is a business plan really necessary? My obligated response as a business consultant is, in short answer form is YES!, however the following question is what always gets in the way of actually creating one: “How do I make/write/structure such a plan?”, that is where the long answer form of YES comes in. While most entrepreneurs now a days will tell you, that their success came from hard hitting hours of shaking hands, knocking doors, and endless self-promotion on the gram….While this is most likely the case, it is not entirely true, as these “self-promotions” are well part of some kind of structured sales plan. You see, a lot of businesses don’t make it past a good idea, some do and become a startup company, and well we’ve all read about the high failure rate of most start-ups, while most fail due to lack of funding or slow sales, there are more than a handful that failed despite of funding and sales, why? Lack of organization, leadership and planning!
You are most likely saying “well duh” right after reading that last sentence, kinda obvious right? THEN why are we still embarking on these great entrepreneurial ventures without any form of planning? We have seen the market offer grow these last couple of months for all kinds of planning platforms, apps and software, that help organize companies from the ground up, without recurring to more expensive forms of control such as a ISO implementation or costly ERP software, but what if you could do all this with a simple sheet of paper, a round table discussion and of course plenty of freshly brewed coffee!
The canvas business model is our generations answer to our business forefathers lengthy, word filled, spreadsheet ridden, non-meaningful mission statement having bunch of papers! All though in its simplest form they both serve the same purpose, this simplified version allows us to capitalize on the important factors of our business, our real CORE business. Now let’s work on it:
We will start by what is most important to any company, not you of course, your customer:
- Customer segments.
a. This is your center stage, we like to simplify this section by naming our “who” section. If not for them, we wouldn’t be selling, thus we wouldn’t be in business. Who are those whom you would like to buy your product/service, and who are those people now? The creation of buyer personas will give us a higher scope of exactly who needs your company, and most importantly why. While there is no limit to the amount of buyer personas you may create, at least one is needed for any kind of business regardless of the industry it belongs to. Try to be as specific as possible, the smaller your niche is, the better you will comprehend it.
- Customer Relationships/Channels.
a. Or in its most simplified form “where”, as in where are these customers within my industry? We know what they look like, what their names are, even what they wear, but where are they? We must know where our customers spend most time, what social media platform they prefer, do they shop online? Brick and mortar? Do they window shop? These are the vitals that will help us correctly communicate what your company is offering, and most importantly how you will maintain these folks as your customers. Anyone can pull off a one-time sale, but how loyal can you make your customers, and how will you do it?
- Value Propositions.
a. So now we know who we want to sell to, and where to find them, this section is the “Why” of sales, and while we know that our product or service is the best out there, do our customers know? How will we communicate the added value of our service over those of our competitors? I always like to compare this section to that one question recruiters would ask me when i was job hunting “Why should we choose you over anyone else?”, ask yourself this questions, from your potential customers perspective, or better yet, from each one of your buyer personas perspective, and create an added value proposition for each one of your potentials.
- Key Activities.
a. “What”, yes what are you doing, selling, or offering? Now that we have established who our customers will be, where we will find them, and why they would choose us over the competition, we must now determine what our company will be doing, or is already doing. This is more than listing the products or services you offer, think about the resources and those you still need, if one of your products or services isn’t quite ready for daylight, what do you need to get it there?
- Key Resources/Key Partners.
a. As we saw in the previous key point, all products and services must be 100% ready to be offered or advertised. So you don’t have the staffing, materials or whatever else that might be needed to get this out the door? Then tap a partner on the shoulder, much like globalization has made countries interdependent on each other, companies have relied on outsourcing services in order to fully focus and offer their best version of product/service. There is nothing wrong with this as it doesn’t take away from your merit, on the contrary it will only help you develop and grow your company, once you can do it yourself, thank your key partner and implement your own internal department!
- Revenue Streams/Cost Structure.
a. Coming form an industrial background (C Class component manufacturing and management) i was always thaught to calculate the most itties bittiest bit of data that would turn into a cost, even if this meant adding .0001 onto your cost sheet, working from back-end into the front-end eventually will help you define a healthy cost structure, one that factors in the total direct and indirect cost related to your product or service, allowing you to create a price strategy that will cover all related cost and contribute to your desired profit margin, your revenue stream (or streams) will be the blood needed to make your company thrive, so it is in our best interest that this not only correctly calculated, but correctly communicated to our end user, believe no one likes price changes in the middle of a campaign, more so if the price is only going up due to a wrong calculation from day 1.
I hope you are beginning to read this last paragraph of this entry and thinking to yourself or realizing how easy this truly is, because it is! A total of 9 areas on a sheet of paper will help you define the back-end structure of your up-and-coming company, as well as how you will communicate this to your future potential customers, please take this planning portion of business very seriously and patiently, as the 45 minutes you invest into this will give you years of useful structure and clear pathway towards success!