When discussing how to make a business plan for a startup, some well-established models can help us.
A complete business model should have at least five perspectives:
- Target market and positioning
- Value proposition
- Structure and process chain modeling
- Mission, vision, values and organizational culture
- Competitive Advantages
Without wishing to go against what the theory emphatically defines as how to make a business plan for a small business, in the practice of operations management the reality is another thing:
“Your business plan will not withstand the first customers. Be sure that this will happen. It could be the first, it could be the next. It doesn’t matter. Eventually you will be wrong.”
Affirms the knowledgeable Pedro Renan, a marketing expert with wide experience in the creation and management of startups.
Confirming this view, a joint study with members of the University of Berkeley and Stanford, the Startup Genome Report Extra on Premature Scaling, with 3,200 startups, showed revealing data on how to make a business plan for a small business:
- In 3 years, 92% of startups had failed
- 74% failed because they escalated the business too soon
In this context, and following some advice from Renan, we will explore the advantages of 4 tools that will help us a lot to understand how to make a business plan for a small business with more agility and assertiveness.
- VRIO: how to start a home-based business with 4 questions
- How to get small business investors: Show that it works!
How to make a business plan for a small business with 4 tools
We have tried to address a range of decisions from initial positioning to the agile management and deployment of your business plan.
But remember these are just a few interesting suggestions. So, analyze each of them and see which has more to do with your leadership style, decision making and the particularities of your company.
1- Strategic Positioning Trade Offs
Whenever you start a business plan, several questions arise.
Some choices need to be made and, after being taken, the next decisions will be based on them, this is what gives entrepreneurs a lot of insecurity.
“These doubts go far beyond plans to start a new business. They are also true for setting goals, financial projections, etc. They will always be wrong.” -Renan warns again.
So, for your mistakes to only be minor, it’s important to remember that they often occur during strategic planning because entrepreneurs want to embrace the world.
The first step is to define what Michael Porter calls 3 Generic Strategies.
But why do we define them as Trade Offs, which means, excluding choices?
Because you can’t mix these strategies. When choosing one of them, the others should be discarded, see:
1- Total cost leadership strategy
Its objective is to produce in the most efficient way, achieving operational efficiency and being able to sell products or services for an unbeatable price, while remaining reliable.
2- Differentiation strategy
Products and services need leadership, with continuous innovation and outstanding quality.
It’s necessary to define some benefit that a majority of the market values in order to offer a product or service with a noticeably superior performance.
3- Focus Strategy
This strategy preaches intimacy with the client, that is, a segment of the market is defined, the knowledge about it is deepened, and it seeks to offer the customer exactly what he needs, in a way that is superior to other providers, sometimes this niche market has no direct competitors.
Understand that those who produce at the lowest cost will have enormous difficulties in offering the best product or service (and vice versa).
Likewise, those who choose the focus strategy will meet the needs of this group, being neither competitive in cost nor quality in the broader market that the two other strategies operate.
By making this initial decision correctly, the next steps in making a business plan for your small business will already be much more decisive.
Thus, you avoid committing some operational contradictions that you might only notice later, if you had not analyzed these 3 options, with due care, in advance.
Check out this chart that outlines the main ideas behind Porter’s generic strategies:
2- Business Model Canvas
As you have seen, many decisions will be made from your strategic positioning.
And these choices all interrelate. Is there any simple and agile way for how to make a business plan for a small business without losing months studying markets and statistics?
“In a business plan, many people use Canvas for its simplicity. But, I don’t believe that it’s a 100% correct method. The important thing is for you to test it as quickly as possible and evolve.”
Renan provides his idea about a tool which, actually, has been used by several successful startups.
In his opinion, the fact that business planning will inevitably fail, doesn’t mean that you simply shouldn’t worry about it:
“Wrong. You should make your plan as thorough as possible and understand all the details. It’s not the end of the journey that matters, but how you get there.”
So let’s understand how the Business Model Canvas works.
It’s a table with 9 fields to be completed by answering a series of questions.
Check out a Business Model Canvas template here and see how to make a business plan for a small business by answering its questions.
Ideally this should be done with the participation of a team through brainstorming, so that the greatest number of ideas and possibilities are raised while making decisions about the business.
Here are some of the questions you should answer:
- What problem of our customers are we helping to solve?
- What value are we delivering to each customer segment?
- Who are we creating value for?
- What are the different types of groups that we want to obtain?
- Which are the most important?
- Through which channels do we serve customers?
- In which of them are we unique?
- How do we relate to our customers?
- What are the relationship mechanisms?
- What activities are critical for delivering value?
- Which do we already achieve and in which do we need to change?
- What are the critical resources we need to create and deliver value?
- Who are our partners?
- What competitive advantages do they offer us?
- What partnerships do we need to develop?
- How much do we earn in each market segment?
- Which of them can we earn more in?
- Is it possible to develop other sources of income?
- What are the expenses of this business model?
- Where can we find waste?
- Where do we see opportunities?
- In which areas can we spend more?
- And, where can we economize?
In an article in the Harvard Business Review, Stanford professor Steve Blank emphatically points out that there is no way for how to make a business plan for a small business without listening to the customer.
So in answering these questions, in many cases, you need to meet with your target audience.
Blank even has a diagram of how to do this:
Pedro Renan reinforces this opinion, as this is the life he practiced in the Startups that he founded or managed:
“Don’t stay locked in your home or office. Don’t start any planning until you speak to customers, users, etc. Analyze all scenarios, do research, interact, make mistakes, learn and then test again.”
In the past, companies and people made plans for months and only then introduced them to the public, afraid that someone would steal the idea.
“If they steal your idea, the incompetence of not knowing how to execute first was yours and the other person will undoubtedly have more success. Today there are business plans that are assembled in days and validated by real people and this makes the process much more dynamic.” -He adds.
And it’s exactly this that we will talk about next; how to make a business plan for a small business with agility.
Learn More: Lean Business Model Canvas: For Every Type of Organization
3- Agile Process Management
Agile methodologies are based on what is called the Agile Manifesto.
It was initially created to assist in the development of software, but today it’s used in product creation and business modeling, among other things.
It’s a series of principles that aim to reinforce the need to make people interact during this process in a more intense and collaborative way, and especially to gather feedback from the client as the process unfolds.
So, instead of only finding out after you’ve launched your product on the market (the Segway, for example) that it’s not wanted by almost anyone else, you can do that during your development and pave the road to success.
In this way, at each stage of the process the team exchanges feedback and, more than that, there is a person who is especially responsible for defending the interests of the final customer and finding out if the product actually has value to them.
Scrum is one of the most used agile methodologies.
Critical Scrum Areas
- Product Owner: Responsible for knowing the needs and desires of the customers in relation to what’s being developed.
- Backlog: The product owner defines a series of tasks necessary to properly meet the needs and desires of customers.
- Scrum Master: A leader who helps make the process move and organizes the following activities.
- Sprint: A specific amount of time during which you must complete certain backlog tasks.
- Daily Meetings: Every day team members get together to give feedback to each other on what’s going on.
- Retrospective: At the end of each Sprint, the group meets, talks about the difficulties and experiences of the project and how to improve the next.
So, did you notice how, with this method, there is always collaboration, agility and attendance to the wants and needs of the client?
Did you also see that with the help of this type of method you can avoid serious positioning problems when figuring out how to make a business plan for a small business?
Check out our other blog posts on how to use agile methodologies:
- Agile Scrum and Kanban: Don’t confuse them any longer!
- Agile change management: Be quick, efficient and responsive
- Lean Kanban Board: How does it differ from other agile methods?
4- SWOT Analysis
Do you think SWOT analysis is a thing of the past? Renan disagrees with you:
“Don’t just use modern trends. There are many old techniques that are more current than ever, such as SWOT analysis.”
Analyzing your company’s strengths and weaknesses to seize opportunities and defend against threats are the goals of the SWOT matrix.
You are likely to remember that the SWOT matrix divides into internal and external environments.
Where your company has control, such as wages, technologies used, machines, facilities, location etc.
Everything that’s outside the company’s domain, such as government policies, interest rates, natural events, population changes, economic embargoes, etc.
The main focus of the SWOT matrix is to know how to relate what you can control, your strengths and weaknesses from the internal environment, to defend yourself against threats or take advantage of the opportunities in your external environment.
Let’s say your startup has a great enthusiastic team of mobile application developers (strength), but they lack a good financial manager (weakness).
An opportunity arises: the government will launch special and facilitated credit lines for new companies wishing to develop software for mobile applications.
To take advantage of the strength of your developers, a SWOT analysis would indicate the need to hire a good financial manager.
- How to perform step by step SWOT analysis: 5 steps to implement
- SWOT analysis examples and tips: Learn how to do SWOT analysis
So, what do you think of these 4 tools? Now do you know how to make a business plan for your small business?
But make no mistake, making a Canvas, for example, is not simple either. You must understand the business you’re entering, you must study the market, you must know the opportunities and more.
Therefore, be aware that you will make a mistake even if you follow everything that has been said. Check out Renan’s last piece of advice:
“The important thing is to make sure not everything you do is a mistake.”
So, do you want to model your business processes in an agile and intuitive way?
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woah! I love your blog. it helped someone who’s starting a small business like me in doing a business plan. I also availed some tools from a businessmental, as I’ve started my business, I’m looking forward for its success. Thank you.
Hi Chris, thank you for your comments!