Why You Should Start Your Own Business With a Power Plan Instead of a Business Plan

Typically, there are two camps when planning to start a new business. There are the folks who need to plan absolutely everything. They buy business planning software and build plenty of fancy graphs and even plan, or should I say guess, what their financials will look like 5 years from now. In the other camp you have the people who don't plan anything. They fly by the seat of their pants without any real direction and hope for the best.

What if there was a third option? What if there was a way to plan for only the high impact areas and leave some of the less critical items such as the Executive Summary for another time? After all, your ultimate goal when you start a business is to get up and running as quickly as possible, right?

Joe Dunnigan, managing director of Balance Capital, a firm that raises money for start ups, says that he sees a lot of people trying to obtain capital with award winning business plans and no substantial proof that the plan will work. This strategy of obtaining financing may have worked in the past but today's environment is different. People want proof, and proof is in the form of profitability.

This is the concept behind power planning. The power plan's objective is to plan a lean but stable business foundation while focusing heavily on those activities that generate income and profitability.

There are 5 key areas of the power plan:

Validate the Business Idea

You need to determine if the market is big enough to support everything you want to achieve out of your business idea. You will need to answer questions like: Is it going to make enough money? How are your competitors doing and how much market share do you believe you can get? Is this a valid idea in a bad economy?

Define Products or Services and Sales Process

Your objective when defining the products you sale and how they relate to the sales process is simple. You want to be able to maximize the value of each of your customers. You want to begin thinking about the lifetime value of the customer and how your products or services will meet their needs along the way. This doesn't mean you have to start your business with every product or service fully defined and ready to sale; instead focus on a direction of where you want to go.

For example, you may have an entry level product, a product that your customer will need every month, and a high end product.

Business Structure

You need to define how you want to set up your business, as a sole proprietor, LLC or a corporation. What licenses will you need to operate? At minimum you can count on a federal tax license and a state tax license. Do you need insurance for your business?

Remember, your goal is to keep your business lean in the beginning so make sure you find out what has to be done now and what can be done later.

Marketing Plan

This is where you will, and should, spend the most amount of your time. You will want to define your marketing tactics, creative strategy, marketing strategy, marketing calendar, sales conversion strategy and measuring techniques. A word of advice, do not short change yourself in this area. It's too important. The better you have defined your marketing plan, the more chance you have at success.

Validate Profitability

What good is a business if it isn't profitable? Here you want to take everything you researched and put create a simple one year pro-forma profit and loss statement. You may find that your marketing costs are too high or that your product price points are too low. It's good to know this information earlier rather than later.

So think of the power plan as an abbreviated version of the traditional business plan. The difference is that you will want to only focus on those things that will get your business up and running quickly and profitably. Once you're up and running, you can schedule time to expand your business plan if you so desire.

David Mickelson has been involved in every aspect of small business for 20 years. You can read his new book on how to start a business or check his daily small business updates at entrepreneurfieldmanual.com

Article Source: http://www.smallbusinessadvertisingarticles.com

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