I have talked to a few friends about a business plan and what are the components of a business plan, and, interestingly, we all have slightly different opinions regarding what really is a business plan. Well this post is to say what is a business plan in my view and address the most important things you need to think about carefully.
For me, a business plan is like a feasibility study of whether the business is durable or not, and a study of your own people and capacity. So what i mean is that you do not do a business plan for a sake of doing it, or to submit it to the relevant authorities, but you do it as a small guide book for yourself. It's like when you plan for a trip, you would definitely list the things you need to bring along with you, and highlight a few very important items such as food, drinking water, a GPS, a map, or even a match fire. Then you walk around your house to find those items and load them into your car. Those things you do not have, you go out looking for them. You either borrow from your friends and family or you buy them.
A business plan is like planning for a trip, but you have to plan for your business trip. The important things are that you have to understand yourself, your business, the competitors, the industry and the environment. When you initially get your idea of the business, it's like you list items you need and go find them around the house. But when things you can't find, you have to go out look for it. And similar to a trip, if you are not ready or cannot find the important things for you to have a successful trip, then you either abandon it, or find something else to do or go. Once you've done your business plan, and it turns out that whatever you do, your business will just not make money, instead it looks like a money-eating machine, then you can stop thinking about it.
So what are the important components of your business plan?
Well you can definitely google the components of a business plan so I won't go into details. But what I would like to stress is what parts are important for you, your business, the shareholders, and customers. First of all, what is important is to understand your market. Understanding your market I believe is the most important thing when starting a business. Because the purpose of your business is to serve the customers no matter who they are or whether your business is for-profit or non-profit. They are the roots that will hold your tree, they are the engine that allows you to drive your car, and they are the people who are funding your company continuously. When you study the market, you will find answers of why would these people buy your product, but not others. What do they think about your product, and whether there is a big enough market to sustain your business. Think about it, if you think people really need your product because it will make their lives much easier would it be important for them to buy it? But the question is not whether it's important for them to have your product or not, but the BIGGEST question is whether they want your product or not. Think of nutrition medicines that you have to take a tablet everyday so it helps your body absorb calcium and protein. It is true that it is important for people to have your product, but would they want to spend their money to buy it? That's a question you have to try to answer when doing your market research. Therefore, I say in whatever business plan, it's important you understand customers. And I strongly believe those who say my market is obvious, and people will definitely buy it because I use it, and my family uses it, you are WRONG because people ARE DIFFERENT and think DIFFERENTLY!
Second, you have to understand your competition. Understanding competition is like understand your enemies at war. Those generals who understand their enemy understands what they are dealing with so they can decide whether they should attack or withdraw their men. In a business plan, understanding your competition is understanding your threats and what you have to deal with. If you don't understand them, you're going into war that you will lose. Competitors may have better capacity, better people, and better technology, and they may outsmart you and defeat you. Definitely you don't want that to happen otherwise your business will be a waste of time, waste of effort and financial resources. Now why would you be concerned with your competitors? This question is similar to why would ants bite you when you walk close to their territory! Once you have stepped in you have threatened their territory, their customers and their market share, so do you think they will sit there and invite you in? NO! Also you have to look at potential competitors. What I mean is that look at people in the same industry that has the capacity to enter your market. If you go in and they see you making profit, definitely they would want to enter. And you know what they would do first? they would study you! So be critical, and alerted.
The last most important aspects of a business plan is to know yourself! after you have discovered others out there. It may look obvious, but it is not as easy as it sounds. I mean, do you think you know well about yourself? I don't think so. Go out and ask people about what they think about you, and what kind of a person you are. You will certainly get 100 different answers, so do not assume you know yourself well! What I mean is you have to look at your team, who are the members, what can they do, how will they add to the business, and who else do you need. Doing business with friends is ok, but you want to do business with people who can contribute and have the ability to run this business. You can have your best friend taking you to this lake both have never been to nor knows how to navigate that place, or you can take your second best friend with you who is good with navigation. You choose! It is of most crucial that the people in your team share the same passion, goals and values. When goals and values and vision are similar, you are sure that the people working will take your business to where it should be. On a trip, if all agree on the same rout, then your gonna have a very joyful trip, but oh boy, if two of you think you should take the road along the coast, while the others want to take the highway then it's going to be a tense drive!
While others are also important, I would like to stress, that these tree components of your business is the basic reason of why you do other parts. For example, you study the industry to look at your profitability and your competitors in a more wider perspective.
SO I hoped you enjoyed and found it useful. Happy Investing.
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