You have probably heard someone say it. Maybe it was a parent, or your high-school teacher or even that friendly grocery store owner (with a wistful look in his eyes). But you always managed to shrug it off.
Because it has finally dawned on you that those words are true: He who fails to plan, plans to fail.
So you want to start a business and you know that if you don’t plan you will fail. But there is something else you probably do not know.
He who over-plans, plans to fail.
Weird isn’t it? If you do not plan, your business will fail but if you over-plan, it will still fail. What do I mean by this? And how does one over-plan?
Over-planning occurs when you spend months, years and eons mapping out your business strategy but you never take the first step, or make the first move to turn your plans into reality.
If you are guilty of this, you are not alone. It takes a lot of guts to start a business. Because of the fear of the unknown, the fear of failing, the fear of losing everything. This fear can be so strong that it will paralyze you and prevent you from taking the first step to turn your entrepreneurial dream into reality.
But it doesn’t have to be this way.
Business planning when done rightly, can help you know if you have a real business in your hands or if you have a white elephant. When I wanted to start this blog, I followed the guidelines I am about to show you to determine if my blog will be a profitable one.
How to draw up a effective business plan.
A business plan, in my opinion, is simply a write-up that shows you how to move from zero business to profitable business. For a business plan to be effective, it must contain methods to verify if a market exists for your business and how to tap into this market to generate revenue.
But it must not be overtly detailed. Not at all.
Sometimes it can be just a page-long and yet powerful enough to let you know what actions you must take to start-up, verify and grow your business.
In order to write an effective business plan, you must answer these questions:
1. What problems does my business or product solve?
If you don’t have a clear answer to this question, you don’t have a business yet. You will need to go back to the drawing board to brainstorm till you figure this one out. Because the success of your business depends on the answer to this question. As I mentioned in this post, the fastest way to become successful overnight is to solve a pressing problem.
Imagine if someone came up with a cure to HIV/AIDS? They will be billionaires overnight right? Exactly. If your product or business solves a pressing problem, you are one step closer to being an overnight success.
Pressing problems are not just limited to medical calamities, diseases or dire epidemics. Boredom is a pressing problem, that is why movies (like the Fast and Furious series), recreational activities (like gaming) and outdoor sports (like soccer, tennis) are hot-sells.
2. Who has these problems?
After narrowing down the problems your business solves, you need to know who has these problems. These people are your target audience. This step is extremely crucial because if you don’t know those that need the solutions you sell, you won’t know where or how to sell your product.
In this stage, I advise you draw up a customer profile of your ideal customer. The customer profile should answer most of these questions:
- How old is your ideal customer?
- What gender is your ideal customer?
- What race/tribe is your ideal customer?
- Where does your ideal customer reside?
- What is your ideal customer’s occupation?
- What issues/challenges does your ideal customer face that makes them need your product?
- What is the lifestyle of your ideal customer?
These questions are not exhaustive but they will help you have a good idea of the customer you are targeting.
3. What is their purchasing power?
This question is another deal-breaker. Not all products are bought by the end-user. For example, toddlers need diapers but never buy it themselves. The same goes for secondary school students who need extra lessons but never pay for it themselves.
Your focus here is to determine “who will pay for your product”. This will have a massive impact on your advertising and marketing campaigns.
4. Where do they hang out?
So you have determined who will pay for your product. The next step is to find out where these prospective purchasers hang out. And am not just talking about social media like Facebook. While a lot of people hang out on Facebook, repetitive advertising is the most effective way to get customers.
In my experience, it will take a customer a minimum of three encounters to decide to listen to you. So find out three other places your customers hang out apart from Facebook and advertise there as well.
For instance, if your ideal customer is a banker interested in an international MBA, consider dropping flyers at local banks, advertising to advanced education groups/forums and paying for google ads.
5. Will they be willing to pay?
Having a product is one thing. But determining if your prospective customers will pay you is another thing. The best way to do this is to verify your business idea/solution. Use a $5 Facebook ad to know how many people in your target audience need your solution before you start investing heavily on it.
When using a $5 Facebook ad, these are the steps I normally follow:
- Go to Facebook
- Click on Ads Manager
- Click ‘Create Ad’
- Select ‘Send People to Website’
- Fill in your website address (if you don’t have a website yet, you can use a survey monkey form or google forms for this. The aim here is to send people to a place where they can answer questions and opt-in for your product)
- Use the details of your ideal customer to fill in the questions that Facebook asks you. Be very careful here. You want your ad to be seen by people who are your ideal customers. For instance if you want to open a cookies and yogurt spot in Lekki, Lagos, your ideal customer is someone living in Lekki Lagos State, Nigeria who is female, single or newly wed between the ages of 20 and 32, who speaks English, is interested in food and restaurants and has a birthday coming up (so she can look for a place for a party or to simply unwind)
- After filling in the details, make sure you choose ‘lifetime budget of $5’
- Then choose the picture you will use and the message you will use. These should be catchy and attractive to your ideal customer. (I intend to do a full post on Facebook ads soon)
- Then click place order.
For this to work, you must have a website or a form that people who click your ad will fill out. Also you must be offering something tangible so they will be interested in filling the form.
The form should ask questions like how they spend their leisure and whether they will fancy patronizing a cookies and yogurt spot and how much they will typically want to spend.
The ad should offer a prize to a random winner and the prize should be related to your product. Like a free cookies and yogurt coupon. This way only people really interested in cookies and yogurt will click the ad and answer the questions on your form.
Also your form must collect their email addresses, so that when you are ready to start business you have people to notify; people who could turn into your first customers.
Now after the Ad has completed, study the results.
How many people was your ad shown to?
How many people clicked your ad?
How many of the people who clicked your ad, completed the questionaire?
What were their responses? Are they interested in your product? Will they be willing to pay? What prices are they willing to pay?
To make this ad even more effective, put share buttons on the form and reward each share with a discount coupon. This can be done with free tools like Typeform or Launcheffectapp. Or you can use the free trial period of Landerapp to do this. The aim is to encourage anybody that fills the form to share it with their friends. This will increase the number of people that will fill the form and increase the data you will get.
If your Facebook ad has a clickthrough rate of 4-7%, that is good. Anything higher than this is awesome. Anything lower than this is not good. So if you Facebook ad was shown to 500 people, if 20 to 35 people clicked the ad, that is good. If higher than 35 people clicked the ad, that’s a great sign. If lower than 20 people clicked the ad, then there is a problem somewhere: either with your ad or the product itself. I strongly advise pausing and looking at the ad critically. If everything is ok with the ad, then your product needs a critical analysis.
Now if 20 people clicked though to your form, how many filled it? if less than 10 filled it, then the questions are either too many and discouraging or the ad was deceptive (it attracted people who did not intend to see questions at the other end)
Next observe the price they are willing to pay. Does this fit in with your plans? If yes, you have a good business in your hands. If not, you need to change either your ideal customer or figure out how to change your price without affecting your profit.
6. If they will be willing to pay, how can I convince them to pay me?
Another factor your plan must address is ‘how do I convince them to pay me‘
Its one thing to have a market for your products but its a completely different thing to get people to give their money to you. The easiest way to achieve this is to get people to trust you. So in your business plan, you have to map out how you will get people to trust you. Then when they trust you, you then have to know how to entice them to patronize you.
To build trust, consider the following:
- Having a solid value proposition: A value proposition is that edge you have over your competition. Services like: home delivery within 10 minutes, nationwide delivery, customized products are examples of value proposition. So find out what your competition is offering and see if you can beat their offer with something of your own.
- building an email list and sending mails to people in your email list at least one a week. The mails should link to articles on your website. These articles should be related to your business. For instance, if you have a photography business consider writing articles about events you covered and what inspired the different concepts you used.
To entice, consider giving discounts to only members of your email list or hosting a giveaway. For the photographer, I will suggest a combo of both: a giveaway where the winner wins an exclusive photo coverage of her event. Then 5 runners-up win 30% discount. For the giveaway to be effective, make sure you target newly engaged people, or people with fast-approaching events (wedding anniversaries, birthdays etc)
7. How can I use them to attract more business?
The best form of advertising is a friends’s referral. So every time you are doing business with a customer, you must consider how you can get them to recommend your business to their friends. If your business is online, software that can help you achieve this is sloyalty.
So there you have it, 7 steps you can use to build a rock solid business plan. What about you? What have you done to take your business from zero to profits? Tell us about it in the comments.
image by zero5phh