Business Plan Mistake # 4
Today we look outside your business to your customer to find our next mistake.
Business Plan Mistake #4 Poorly Defined Customer.
Everyone is not your customer! Too often small-business owners, afraid to walk away from even one potential customer, try to define their market so broadly they include everyone. The danger? Without a focus, you end up spreading yourself so thin you do not effectively reach any particular customer.
The chiropractor who defines his target as anyone with a spine may think he is indicating he has unlimited potential. In reality, he is showing a lack of understanding of the buying characteristics, beliefs, and biases of consumers in his market. There are people who do not believe chiropractic treatment is “real medicine.” It is often expensive to convert nonbelievers. Selecting a narrower market would allow him to concentrate his marketing efforts on those customers most likely to buy.
Once you truly embrace the idea of focus as the key to a successful business, you are ready to begin developing the rest of your plan. With a clear definition of your customer, it is easier to answer the questions that follow.
Business Plan Mistake # 3 Too Much Detail or the Wrong Type of Detail
As we continue to explore the mistakes business owners make in their plan, less # 3 is particularly common among engineers and technical folks.
Business Plan Mistake # 3 – Too Much Detail or the Wrong Type of Detail
There is a story about an impatient young man who went to visit an old Bible scholar. He demanded the old man tell him everything he needed to know about the Bible while standing on one foot. The old man smiled, stood on one foot, and said, “Do unto others as you would have them do unto you! All the rest is commentary.”
Why do I include this story in a book about business planning? It is not because I think business owners require divine intervention (although maybe they do sometimes). I include the story because it contains a wonderful lesson for business owners.
Regardless of what you believe about the origin of the Bible, most people agree it is a complex work with multiple themes and messages contained in its pages. And yet, in a few words, the old man summarized the content, presenting it in a form many people would agree captures the essence of the document.
The lesson is simple. As you write your business plan, imagine you are writing for an impatient young man and try to meet his challenge. Boil down the description of your business to a simple message, deliverable while standing on one foot.
In a recent blog post, Ben McConnell gives a great example of how when we try to impress our audience, we often complicate our messages when the simple will work much better. He gives two examples of a company mission statement. The first, written to impress:
Understand how to create better innovation opportunities for our products by listening closely to our customers’ needs through a world-class community solution that deepens our customer relationships and helps customers share and collaborate together
The second expresses the same idea, in a way everyone can understand.
Innovate using customer feedback.
Which makes more sense to you?
Out of the Mouths of Babes
I have spent several hours last night reading some amazing business plans. The would-be entrepreneurs who submitted the plans are not currently looking for investors or loans. These are student plans, written by High School students ( juniors and seniors) as part of the Hamilton County Entrepreneurship Advancement Center’s Education Program.
This is the 4th year I have been involved in the competition and it is always a treat. Some of plans are well written and well researched, but aren’t viable businesses. Others contain a great idea, hidden in a poorly written plan.
And every year, there is at least one, which makes me stop and think someday, I am going to say I knew him/her when.
This year the plans are less innovative, more practical; a computer repair shop, window cleaning business, designer dress shop and a paint ball facility.
Like their adult counterparts the young entrepreneurs create unrealistic financial projections. They have however, in many cases, really thought through the elements which will be necessary to pull of the business they have conceived. I know a number of adults who could take lessons from him.
The oral part of the competition is Saturday, January 9th and I can’t wait see if they are as good selling their ideas in person, as they are on paper. Do bankers or VC’s get this excited when the read a really good plan? I hope so! Our economy needs the plans and people who will be excited to seem them succeed
End of Year Review
As 2009 winds down, and I look at the P & L for the year, like many business owners I am disappointed. Clearly this has not been my most profitable year. ( I am not alone when I say that.) While some of the blame lies with the economy, much of the blame lies with me. But, instead of wallowing in self pity, I know it is time to look at what we did and develop a new plan for next year.
Over the next few weeks, I will be rewriting my business plan, and deciding which strategies need to change. I have already made a few changes and investments.
- Enrolled in Sandler Training through Trustpointe
- Changed the compensation plan for my employees to reward sales activities
- Refocused on planning which was a central part of my early business success
Over the next few weeks, there will be more changes. There must be, if I am going to be happier with my business performance next year. What about you? What changes will you make in 2010?
Contingency Planning – More than Backup
Yesterday, my post talked about the need to back up your data on a regular basis. Having access to your information is a key starting point, but surviving a crisis requires more than just data recovery.
Your disaster recovery plan should also include:
- Where you will operate if your office is damaged or destroyed.
- How you will finance equipment replacement. Do you have adequate insurance to replace office furniture, equipment, inventory and other assets?
- How you will cover business expenses. Continuity insurance provides additional insurance to cover expenses such as moving, or damages caused by missed deadlines.
- Documentation of everything you own. Even if you have adequate coverage, most policies require a detailed list of what was lost, damaged or stolen.
- Who will take care of your customers if you can’t. In the event you can not complete a project or meet a deadline because of the business interruption, do you have a relationship with someone else can serve your customers on a short term basis?
According to the Financial Planning Association, of the businesses that suffer a disaster, 40% fail to reopen and 25% that reopen close within a year. Plan ahead!
Disaster may never strike, and you may never need to execute your plan. But if something does happen, a well thought out plan, will help you through the transition, and increase the odds that a temporary business interruption does not become a permanent one
Want help developing answers to these and other business planning questions?
Check out our Business Plan Seminar – December 17 or January 21
Even Optimists are Prepared
I am an optimist. I believe things will work out. However, when it comes to my business I also know that things can go wrong, and planning is not being negative, it is being prepared.
Accidents happen! But even minor mishaps can be major catastrophes for small business owners. Every year, thousands of companies are unprepared for the interruption caused by a minor fire, flood, and burglary or computer meltdown.
Creating, and implementing a Business Continuity Plan as part of your overall business plan ensures your business survives any disaster!
What should your plan contain? - Information Access is # 1
For many small business owners, the computer is the heart and soul of the business. Unfortunately computers crash, virus’ attack, natural disasters occur and every user makes mistakes from time to time.
The consequences can be disastrous. Rebuilding financial information, contact lists, E-mail records or project files can be time-consuming, expensive and sometimes impossible.
Important information should be copied to some type of external media. I used to recommend zip disks, CDs or DVDs, tape back-up or external hard drives. Too often I found business owners diligently copied all their key files and stored the CD’s or external hard drive, right next to their computer. A flood or fire would wipe out both copies. So if you use this technique, be sure you have a plan to take the copies out of the office on a regular basis.
On-line backup provides a simpler, more secure, and less time consuming solution. For a nominal fee, on-line back-up solutions allow you to store information on a secure, encrypted server. The costs vary depending on the amount of data to be stored. One of the most affordable alternatives for small business owners is Mozy.com For just a few dollars a month, you can protect your business.
Not sure if you need to spend the money? Ask yourself these questions: If my computer didn’t turn on tomorrow:
- Would I still have a business?
- Would I lose a significant amount of time, and money rebuilding my data
- Would I know what to do?
Don’t like the answers? Then it is time to explore a back up solution.
Want help developing answers to these and other business planning questions? Check out our Business Plan Seminar – December 17 or January 21
Business Map Workshop
It is Planning Season!
As the year winds down, it is a good time to think about business planning, so I will be offering two sessions of my popular BusinessMap workshop on:
December 17, 2009 and January 21, 2010.
Each program will run from 8 am to 11 am.
Thanks to Spin Web for graciously offering to host the program at their offices located at: 8580 Cedar Place Drive Suite 116 Indianapolis, IN 46240
In this lively three hour workshop, participants will learn the elements of a good business plan, as well as tips and strategies on how to get started, and make planning an integral part of your business operation.
Business Map© will focus on How To:
- Get started, including a simple outline to use as the foundation of your plan.
- Organize information – the structure and flow of a typical business plan.
- Avoid the 10 most common mistakes small business owners make when writing their business plan
- Decide what each section should contain – where to find supplemental information.
The Fee to attend is $75.00 and it includes a copy of my BusinessMap workbook, and a CD complete with samples, plan outlines and spread sheets to build Performa Financial statements.
Seating is Limited! Register Now!
Inventors vs Entrepreneurs – Ideas vs Action!
Lots of people have ideas, only a few have successful businesses. Jeff Stibel, writing for the Harvard Business Review takes a closer look at the differences between being an inventor and an entrepreneur. Stibel says:
… don’t confuse being an entrepreneur with being an inventor. Great ideas are a dime a dozen. Action is what differentiates an entrepreneur from an inventor. If you want to focus on ideas, become an inventor — not an entrepreneur.
As an entrepreneur, committed to a course of action and ready to start a business, a business plan is a integral part of that process. The trick is to focus on planning – the process of thinking through your alternatives, but not the plan itself. If you get hung up on the plan it is harder to change direction. Successful entrepreneurs are flexible, willing to change direction if the path you are on isn’t working.
Do you have a business idea but are not sure how to convert it into a business? Start with a Plan!
Business Plan Lesson 10: Closing Thoughts
This is the last post in a series on how to write a business plan. If you are just joing us for the first time, you can still see all the posts sign up for the Free Weekly Business Planning Series and recieve a blank business outline too!
As you finish your business plan draft, remember, it doesn’t matter how simple or complex your business plan is. The process, not the finished product, is what’s important.
A good business plan is never finished. The best business plans are not beautifully bound documents gathering dust on a shelf. They are tattered and smudgy from frequent use as a roadmap, showing where a business is going and how it plans to get there.
Your business plan is an annual process, beginning with a review of what you accomplished in the previous year. Did you miss, meet, or exceed your goals? Were your systems sufficient? Did you correctly anticipate market trends and competitor activities?
Once you have completed your assessment of the past, it is time to look forward. Reevaluate your answers to each question, revising as necessary for the coming year.
Your Final Assignment
Put an appointment on your calendar for one year from today for a business plan review. Schedule 1/2 day, in a quiet place, away from the office, cell phone and email. And review your plan. Answer the questions listed above, and plan the next year.
And before your go, I would love to hear what you thought about the process please share your feedback below
Business Plan Lesson 9: Appendix
This is the ninth of our 10 part series on business planning If you want see all the posts sign up for the Free Weekly Business Planning Series and recieve a blank business outline too!
Embarking on a long trip, it is wise to pack an extra bag, taking along things you might need along the way. In your plan the appendix is your extra bag. It contains anything else you would like to share with your readers.
The appendix is where you put all the other “stuff” which is important, but doesn’t seem to fit anywhere else. For example:
- Expanded product descriptions, technical specifications, and patents
- Comprehensive financial statements
- Certifications, licenses and contracts
- Newspaper clippings, testimonials, and letters
Your Assignment:
Share with other readers what you will be including in your appendix section.
Ready for another conversation about business planning. We are still holiding 30 minute weekly discussions every Wednesday at 1:00 Eastern time. Your fee to participate is still $5.00
