February 20, 2015
A question on a blog today asked whether a company needs a business plan and/or a strategic plan when forming for the first time. My answer caused some discussion, because they thought I was disparaging strategic planning and direction in favor or more short-term business planning.
Answering the discussion, I stated, "A small to medium-sized business needs a good, well-thought out business plan. That plan should include a vision, strategic goals and objectives, and a business plan. Within the plan should be a risk assessment, capability analysis, and estimate of future stakeholders (assuming that the business has potential for impact and eventual success".
One respondent disagreed. In his comment, he indicated that no business should ever consider bringing itself to the market without a strategic plan. He noted that even though the company may be small, it still needed to analyze its prospects and determine its goals and objectives for the future.
I could not agree more with his comments, but might suggest that he consider a simpler alternative.
Newly organized small businesses do not need a complex strategic plan. What they need is a view for doing business. This is easily accomplished by a well-constructed business plan, that takes into account many of the same aspects that a larger firm's strategic plan might do. That includes vision, goals and objectives, and potential risk and competition. These can be elements of the business plan at start-up, or pre-start-up, and expanded later into multiple plans as the business expands.
Why do I say that?
Well, if you consider that fully 50%+ of new businesses fail in the first year, you might consider that those who don't have succeeded for only a couple of reasons:
1- They are unique, new, and have no competition.
2- They have spent the time to think out their plans, in relation to what is already out there, and what their specific niche will be in the market.
Either of those is doable, and neither, in a small business entry requires a complex set of documents defining strategic direction and resources. This can all be in a more simplified, but still well-thought out business plan.
So the, what do you need in the business plan at startup?
I might suggest the following outline:
- Corporate vision - What do you want to do,m and how do you expect to impact the market
- Goals and Objectives - Where do you want to go, where do you want to be in 1-3-5 years
- What is your competition? Locally-regionally, nationally? Are you considering a physical location, or a virtual location? Internet?
- What is your expected operational processes? How will you do business?
- What are the risks to your approach? Can you answer those risks with new directions? Can you overcome those risks to succeed beyond the first year? Do you have any chance of success in the market?
- What is the market? Are you dealing with a complete monopoly? What percent of the market would you accept as success?
- Why are you better than your potential competitors? What can you do that they do not currently do? What can you do better?
- Who supports your efforts? How will you finance your effort? Who are others who have done similar things? What best practices can you apply?
- What risk is involved? is there a personal risk? Is there a market risk? How will you overcome or avoid that risk?
Markets are fickle beings, and very changeable. The fact that you want to enter it does not mean success. You may be entering a very crowded field, and without differentiation, you might just be part of the pack, and barely able to succeed. Small and medium sized new offerings are at real risk, and careful, but simplified planning in advance can reduce the possibility of failure.