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The debate over the relevance of business plans is a debate that continues to divide opinions. Although conventional wisdom suggests that a business plan has a role to play in determining the success of the business, more and more, and especially in the world of startups, some avoid it.
However, business plans are an essential part of business success, especially when you consider that many businesses fail. A good business plan is where an entrepreneur interprets the results of tests on their business idea or business so that they present a strategy that has the best chance of success. This validation is one of the main differences between a powerful business plan and an irrelevant document.
If you want your business to be successful, whether it is to attract customers, raise funds or hire the right team, you need to seriously implement a solid business plan.
Related: Business Plans: A Step-by-Step Guide
Why a solid business plan is always relevant
Beyond the business plan acting as an instrument that banks and investors use to make funding decisions, it also serves a number of other key purposes. Primarily, this allows you to think about your business and the proposed strategy in a way that you can never talk about. The only real way to put a business plan in place is to test the hypotheses and interpret the results. There is no denying that the business plan will always remain inaccurate to some extent since you are trying to predict the future. However, the smaller the margin of error, the higher the quality of the business plan. Validation leads to quality.
Who your exact customers are, what they want from your product or service, how much they are willing to pay, and what the competition is doing are questions you cannot answer while sitting behind a computer. Face-to-face interactions with customers, suppliers and potential competitors are what will confirm or dispel the initial assumptions. Even if your initial assumptions are correct, talking to your customers will be very informative and the value it will bring to your business will be immeasurable.
This is exactly what the founders of Airbnb did to create their home sharing platform. The assumptions you test can be incorporated into the entire business plan, including financial data, to develop a plan that has a real layered context.
Related: 4 Reasons Why A Traditional 40-Page Business Plan Is An Insane Waste Of Time
How to take your business plan seriously
To avoid having your business plan filled with untested assumptions that make the business plan irrelevant, focusing on validation, as discussed above, is the best way to show intent. Since much of this validation will come from face-to-face meetings, there are a number of tools that you already know in order to “find” your customers and competitors to validate. Searching on Twitter, Facebook and LinkedIn groups is a great way to find the people you want to talk to.
Beyond that, all of the niches have leading publications focused on service to their community. For example, if your target market was coffee lovers, sites such as Coffee Lovers Mag would be a great place to start finding your audience.
Once you find them, the right questions to ask to get the right information and inform your business should focus on understanding the main problem for customers and how you can solve it. So listen to what they say and explore further to find the root cause of their problem. Then develop a solution and repeat with the client until you get the right solution. This structures your “market research” to get the information the right way and to analyze and interpret it in a meaningful way. This information can then be entered in the qualitative and quantitative parts of your business plan.
This form of validation is not a one-off exercise. Staying close to your customer and understanding what works and what doesn’t work is at the heart of business success. As such, validation is an iterative process of testing and revising assumptions in your business. Integrating the results of your iterations into your business plan ensures that your business plan does not lose relevance.
Keep your business plan relevant
Unfortunately, once prepared, many companies do not return to their business plan after production. It is put aside and forgotten. However, a person’s propensity to ignore their business plan is directly proportional to the quality of their business plan.
Developing a plan as described above will inform you of the key assumptions and risks of your plan. Reacting to what is happening in real life allows you to adapt the assumptions and narration of your business plan so that you develop a document that is relevant and relevant to your business.
This relevance will be evident to banks, investors and potential recruits. Therefore, this level of detail and self-awareness will help you raise capital or hire the best.
It is important to extract the right elements from your business plan that allow you to manage your business on a daily basis, as this lets you know what is working and what is not. That’s why a simple dashboard that illustrates your Key Performance Indicators (KPIs) and an early warning system relevant to your business is often overlooked, but is an important part of any business plan.
Although business plans seem to be losing their importance, high business failure rates should provide the impetus to develop well thought out plans.
A game-changing business plan must be three-dimensional, so it distills lessons from the real world, allowing you to test and revise assumptions. This iterative process will give your business the best chance of success while increasing your credibility with investors and your team.
Related: How to Write a Business Plan