Business Planning for Solo Entrepreneurs
5 Steps to a Plan That Actually Works
Building a business plan is arguably the most dreaded task for an entrepreneur. It’s difficult to know where to start and the Internet is teeming with downloadable templates that range from slick and corporate to something that looks like it was made for a Grade 5 class project. Invariably, they are many pages long without any content, and assume you have answers to a whole bunch of questions you haven’t even considered yet.
You do need a plan. The planning process is infinitely useful and should be something you do before you invest another dime or another hour into developing your product, or trying to reach your audience. But before you sigh and grab another drink in preparation for three light years of painful writing, I have some good news for you:
Planning does not need to be painful.
Nope, it doesn’t.
Of equal importance:
“Planning” does not mean “writing”.
Planning is about developing a clear understanding of where you are going, and what you will be doing to get there.
The traditional business plan
The traditional “business plan” has been around since the early 1900s and started to take off in the mid-1950s as entrepreneurship became increasingly possible and increasingly attractive. Entrepreneurs have been using business plans for decades, but the format has not evolved much. The traditional business plan is usually associated with an effort to get investment capital or some other type of funding, but this is not usually what a solo entrepreneur is looking to do.
Additionally, the typical format includes all sorts of information that a small business would need to assemble in order to convince an investor that their business is viable and strong, and will produce for them attractive returns in a short duration. Really, it’s a marketing document. It’s a pile of papers that are intended to present your business in the best light possible and is typically accompanied by a presentation and a gaggle of shiny people who spend months preparing for the 1-2 hours that will determine the future of their little startup.
Did you catch that there?
I said “months”. Not a weekend. Not a day. Months. That’s how long it should take to build a proper traditional business plan. Many solo entrepreneurs I have spoken to think they should be able to crank out a business plan in a weekend, or in a few days. That’s understandable, given that their business is typically much smaller in scale, but I believe the bigger problem here is a disconnect in understanding what business planning really entails.
If you want to write a traditional business plan, you will not accomplish this in a weekend. You cannot. If you do, it will be mostly fiction and tragically diluted. This does not serve you or your business. It only serves to check that task off your list.
The good news is that unless you are trying to grow your company very quickly and require gobs of money from outside investors, you don’t need to write this type of plan. Please don’t. Your emphasis will be on writing and wording and whether this sentence sounds right, or that paragraph is too long, for an audience you will likely never have.
What you actually need
Listen, you need to plan. You need to go through the process. You need to record the results. You just don’t need to waste your time on wordsmithing right now. If you want to do that in the future because you have been so wildly successful and now need investors (obviously, because you built a great plan), then you will have everything in place to do so if you follow what I describe below.
The outcomes of the planning process should be confidence and clarity. You should be building a foundation for your business that makes you want to rush forward and do all the things because you are sure about what you need to do in what order. You can hold yourself accountable to milestones and a vision, and you can adjust as you go.
5 key steps
When building a plan, your goal is to prove to yourself that a hypothesis is or is not true. You are trying to gain clarity into your business model and then build a roadmap for executing on that model. I’ve outlined the key activities that you should be undertaking during your planning process, which will lead you to a plan that will work. This process is a bit like a funnel, where you start by throwing a lot of stuff into the big end, and that gets slowly and progressively filtered and defined until you come out the other end with a specific, actionable and validated plan.
The important thing to remember is that this whole process is iterative, so don’t worry about getting everything correct right away! Be as specific as possible in your responses – this will make a significant difference down the road.
1. The Hypothesis
Your hypothesis is your assumption about who your customers are and what they want. Usually you have some idea of who’s going to buy what you are offering and that’s the place to start. There are two main activities you want to undertake during this step – defining your customer and defining your value. Do these in sequence and adjust as you go.
Define your customer. Jot down as much information about this customer as you can think of. Be very specific, and think about both demographics (factual data about this customer such as age, gender, location, income level) and psychographics (how this customer feels or behaves). This is your first stab at this, and you will come back and refine it, I promise. Common snag: You may have more than one customer and that’s ok, but be very sure that you actually have multiple customer groups, and not that you are just trying to make sure you leave yourself options in case one doesn’t work out. Only distinguish your customer groups if you would reach them differently, sell them something different, or tell them a different message.
Define the value that you provide to that customer. Write down a short summary (in point form) of your product or service, and then think about what value your customer will get from that offering. The best way to do this is to list off any pains, or problems, that your customer has right now as they pertain to your offering, and list off any gains they might get from your offering. A gain would be any condition that would allow them to be further ahead than they currently are right now, if they didn’t have this problem.
2. The Proof
WARNING: This step is HARD. And frustrating. But so, so necessary. What you will learn in the process will prove to be infinitely valuable now, and in the future.
Once you have established your hypothesis, you want to prove to yourself that it is (or, is not) true. Don’t skip this step. If you learn that your hypothesis leads you to a business that won’t make money, you sure as heck don’t want to keep charging down that path. This is the step where you pivot and retest, over and over again, until your results give you the confidence to throw everything you have into this business.
Prove that your customer can and will pay for that value. Using the resources available to you, go out and find evidence that your customer exists in numbers large enough to support your business, that they have enough money to afford your services, and that they truly do have the problem you are trying to solve. You can find demographic proof in statistics websites, trade association publications, and a variety of different non-profits that track certain population groups. Psychographic proof may be a bit more tricky to locate, but look for samplings on forums, special interest websites, group pages, and articles by industry experts.
Determine how much you can sell. To prove that your market buys what you want to sell, or something in that general category, check out trade association websites, which will determine the size of your market, and sometimes will break it down into sub-categories, which is really helpful. Go find your competition and see if you can track down articles about them, or even their own articles, which state what their revenue was in a recent period. You will need to be a bit of a sleuth, and this may be more or less difficult depending on your offer, but there are lots of clues out there if you get creative. Once you have gathered enough evidence to make an educated guess, estimate what percentage of your niche market you think you could possibly convert to customers, and the average price of your offer. These two numbers together will provide you with the proof that you can make revenue within a range that you would consider acceptable.
3. The Outreach
By now, you should have determined that you have a viable customer and a viable offer. With that confidence in your back pocket, it’s time to figure out how you’re going to reach your customers. In this step, you are creating the foundation for your marketing and sales plans, which you will create later.
Determine your channels. Your channels are the places where you can deliver your message. You will need to do some research and figure out where your customers spend time, or where they go to try and get help solving their problems. Do they hang out in forums? Facebook groups? Can you find them through a popular blogger or on social media? There are so many special interest sites out there – some niches flock to these. Try and figure out what kind of reach these channels have so you can determine how valuable they will be for you.
Identify your key partners. I cannot emphasize enough the value of partners in reaching your customers. Partners should be organizations or individuals who have already established a presence and trust within the market that you are trying to serve, and can provide you with exposure. Depending on the nature of the partnership, you may need to develop a relationship over time until that partner is receiving enough back from you to make a stronger partnership worthwhile. Partnerships develop over time and must be reciprocal. Identify the partners you would really like to have a relationship with. How you develop that relationship will be something you worry about later.
4. The Money
Unless you are independently wealthy and building this business out of the goodness of your heart, you are likely going to need to figure out how you will make it viable. This applies even to a not-for-profit, and a cause-based business. Every business will have expenses and you will need to make at least as much as it costs you to run your business if you would like to continue operating. While these numbers don’t need to be exact at this point, they should be “real” enough so that you have a reasonable chance at being successful. You will update these on an ongoing basis as your learn more about actual spend and income.
Determine expenses. You will want to figure out your expenses first so you know how much it costs you to run your business, and, therefore, how much you will need to earn in order to keep it going and growing. Include everything here and don’t cut corners. The more realistic you are, the more likely you are to reach your goals. Don’t forget to pay yourself too – what good is owning your own business if you make nothing? Add all of these up so you have an annual total.
Determine your pricing. Eventually, you will need to charge for your product or services. Conduct a market scan and see what others are charging for similar offerings. Will you package these up? Can you charge the same, given what you are offering, or will you need to start at a less expensive offer? Price each offer accordingly.
Create revenue goals. Your revenue goals should be developed first by examining sales trends in your market (see Step 2: The Proof), realistically estimating what percentage of those sales you could realistically acquire, and the timeline in which you think you could acquire them, given all the things that will need to be done before you will get your customers’ attention. Develop short-term and long-term goals so that you can learn quickly and adjust for the longer term.
IMPORTANT: If your sales goals do not equal or exceed your expenses, it’s time to go back and revisit your offer, your market and your pricing until you have a realistic plan that you think will work, and will sustain you and your growth.
5. The Roadmap
If you’re still with me, congratulations! You’re on the last step, where you make the rubber hit the road. By now, you should feel pretty good because you’ve really proven to yourself you have a viable business. Now is the time to figure out how you’re going to execute on this plan. This is the big difference between successful and not-so-successful businesses – how you execute. The more detailed your plan, the more likely you are to execute with shining colors.
Build a task list. Don’t worry too much about having everything perfect right now – just start noting all of the things you think you are going to need to do in order to achieve your short-term and long term goals. Some of these tasks will be milestones that will require a whole bunch of smaller sub-tasks. Some of these will be detailed steps. Write them all down, and think about whether you can break each down further. Group them as needed.
Create a schedule. Finally, using 12-week cycles, you want to chart all of these tasks and milestones in chronological order, based on dependencies and logical progression. I can’t stress enough how important it is here to be very detailed. If you haven’t built a schedule that can be tracked down to the week or day, you will have a hard time staying on track and focused. Start with your big goals – the ones that will take you a year, maybe two to achieve. Work backwards from those and chart the biggest steps first, along the timeline. Then fill in the details and figure out what needs to be delivered when in order to make all of these milestones happen. You should end up with a plan that allows you to move towards your goals every day, through micro steps.
For more information on creating a scheduling system that works, I’d recommend checking out the 12-Week Year, and then going to grab the Best Self Journal, which has been created to follow the 12-Week Year model.
You’re now ready to get started. Yes, it may have taken you some additional time but look how much more prepared you are! With a proper plan in place, you should be able to focus on executing each day without worrying about whether you are moving towards your goals. Take a moment to check in on a weekly basis and see how you’re doing in terms of moving closer to your goals.
Good luck on the entrepreneur’s journey! Let me know in the comments how you’re progressing or where you’re having trouble getting started.