Ultimate Guide to… Business Plans {For Beginners}

Ultimate Guide to… Business Plans {For Beginners}

When most of us think about business plans, we often envision a long, extensively detailed document with reams of data and financial forecasts {followed by lots of eye rolling}. While that may be the requirement for people seeking outside funding, a business plan doesn’t have to be all that complicated to be effective. It provides the blueprint for how we intend to build our businesses, so the plan only has to be as long as we need it to be for mapping out our goals, action plans and financials for success.

Most business owners create a business plan on an annual basis to get themselves organized for the next year. It’s a way of taking stock of their progress, examining what’s working, and laying out goals and plans for the year to come.

In addition, if you have been struggling in your business or are considering something new, the entire process of creating a business plan will help you see where you can be most profitable. It will also tell you where you are going astray and need to change.

Most business plans are comprised of the following parts:

  • Description of business model and target market – What kind of business are you implementing, and who are your target customers?
  • Unique selling proposition – What do you have to offer that makes you different from everyone else? >>> Read: 5 Steps to Crafting a Unique Value Proposition that Resonates {As a Creative Entrepreneur} 
  • Business goals – What are specific, measurable goals that you want to achieve and by when?
  • Marketing plan – What marketing strategies will you put in place and what are their timelines? >>> Read: {Free Mini Course} Tackling Your Marketing Plan
  • Action plan – What are the tasks you need to complete and by when?
  • Financial forecast and budget – How much is all of this going to cost on a monthly basis, and what kind of revenue do you expect? How long will it take to break even and make a profit?

A business plan is a living, breathing document that will grow and change along with our businesses. If market conditions change, laws or regulations change, or we aren’t seeing the results we expected, then it’s time to adjust our plans. We should use it as our guide and refer to it often as we plan each week, but not let it restrict our efforts.

IT PAYS TO BE SMART ABOUT YOUR GOALS

You’ve probably heard this old adage many times before: “He who fails to plan, plans to fail.” For our businesses to succeed, we need to have very specific goals. They can and will be revised over time as things change, but we have to start somewhere.

In addition, our goals should be SMART.

  • Specific – Be specific about what you want to achieve. Saying you want to create more infoproducts is vague. Instead, you might set the goal of publishing three new infoproducts next year – one eBook and two eCourses with video, for example.
  • Measureable – How will you know whether you have achieved your goal? If you want to increase your conversion rate of prospects to customers, make sure you can track each part of your sales process so you know exactly when and where the prospect becomes a customer.
  • Action-Oriented – Goals need to be something you can attach specific actions to – something you can plan for and control. For example, setting a goal of moving up to the first page of search results in Google is highly desirable; however, it’s not under your direct control. Instead, consider implementing three new SEO tactics over the course of the next three months to help your site move up in the search engines. Then list out the detailed actions you'll take for each of the tactics.
  • Realistic – Don’t set yourself up for failure by setting goals that are unrealistic or impossible to achieve. I see this so many times, people new to marketing often think they can make $10,000 in three days because some guru said they can. That’s just not realistic.
  • Time-Based  As with any of your plans, put a timeframe around your goals. You could set a goal of doubling your traffic in the next six months, or writing one infoproduct per month for the next year.

FREE GIVEAWAY >>> Defining SMART Goals Cheat Sheet

Our goals are our roadmaps to success. Every successful business person sits down and goes through the process of defining their long-term, short-term and immediate goals annually, monthly and weekly. Why shouldn’t we? Setting and meeting goals will show us how much we’re achieving, and will keep us motivated along our paths to success.

ANTICIPATE ROADBLOCKS AT THE OUTSET

It's great to set goals, but how will we meet them? As part of our business success roadmap, we have to figure out exactly what resources we’ll need to achieve our goals. An effective way to do this is to first look at what obstacles we face, then think about the steps we need to take to overcome them.

Identify Potential Obstacles
No matter where we are in our careers, there will always be obstacles waiting to challenge our best laid plans. The key to dealing with these challenges is to anticipate them as much as possible and make sure we have the resources to push them out of the way.

The most common obstacles that creative entrepreneurs and professionals face are:

  • Lack of skills and knowledge – Are there elements within your plan that you just don’t know how to do? For example, perhaps you’ve never segmented a mailing list before, or you don’t know how to set up a customer retention strategy. In some cases, you may not even know the right questions to ask in the first place.
  • Not enough time in the day – There is never enough time in the day to do everything you want to do, especially for those creatives who have a million ideas running around in their heads. The question really becomes how much time do you need to devote for your business plan to succeed?
  • Insufficient funds – It’s a rare person, indeed, who has all the funds they want to implement every idea they’ve dreamed up. Figure out how much you need for your ideal plan, then look at how much you can actually afford to spend on implementing it.
  • No support network – As an entrepreneur, lack of a support network can be a big problem. Not a lot of friends and family understand the struggles or sacrifices you make on a daily basis. Do you have people to go to when you’re stuck or need a boost?

Overcoming Obstacles
Now that you’ve anticipated your challenges you can start identifying and putting in place the resources you'll need to counter them. You may find that you will have to adjust your goals and plans a little if you can’t get the resources you'll need. It’s better to do that sooner rather than later.

  • Focus on the skills you need – Focus on the most important skills or knowledge that is relevant to your business model; be careful not to get sidetracked. If it's not useful to learn a new skill right now or improve on an existing one, block it out.
  • Manage your time and delegate – Unfortunately, you can’t make time slow down or expand. Therefore, if you have the funds, outsourcing is usually your best bet for growing your business faster. Make sure you know exactly what you want to outsource so that you can pick the right people.
  • Budget wisely – If you are working with a tight budget, you’ll have to be creative with where you spend and where you save. Put your money into the places that will have the greatest impact on your success and think twice about the rest.
  • Build your support network – For some, building a network of friends and colleagues comes naturally. For others, it has to be a planned, scheduled activity. Check out the top online groups in your niche and find at least one where there are people you can relate to then participate and get to know the other members as much as you can.

IT PAYS TO BE SMART ABOUT YOUR GOALS

You’ve probably heard this old adage many times before: “He who fails to plan, plans to fail.” For our businesses to succeed, we need to have very specific goals. They can and will be revised over time as things change, but we have to start somewhere.

In addition, our goals should be SMART.

  • Specific – Be specific about what you want to achieve. Saying you want to create more infoproducts is vague. Instead, you might set the goal of publishing three new infoproducts next year – one eBook and two eCourses with video, for example.
  • Measureable – How will you know whether you have achieved your goal? If you want to increase your conversion rate of prospects to customers, make sure you can track each part of your sales process so you know exactly when and where the prospect becomes a customer.
  • Action-Oriented – Goals need to be something you can attach specific actions to – something you can plan for and control. For example, setting a goal of moving up to the first page of search results in Google is highly desirable; however, it’s not under your direct control. Instead, consider implementing three new SEO tactics over the course of the next three months to help your site move up in the search engines. Then list out the detailed actions you'll take for each of the tactics.
  • Realistic – Don’t set yourself up for failure by setting goals that are unrealistic or impossible to achieve. I see this so many times, people new to marketing often think they can make $10,000 in three days because some guru said they can. That’s just not realistic.
  • Time-Based  As with any of your plans, put a timeframe around your goals. You could set a goal of doubling your traffic in the next six months, or writing one infoproduct per month for the next year.

FREE GIVEAWAY >>> Defining SMART Goals Cheat Sheet

Our goals are our roadmaps to success. Every successful business person sits down and goes through the process of defining their long-term, short-term and immediate goals annually, monthly and weekly. Why shouldn’t we? Setting and meeting goals will show us how much we’re achieving, and will keep us motivated along our paths to success.

ANTICIPATE ROADBLOCKS AT THE OUTSET

It's great to set goals, but how will we meet them? As part of our business success roadmap, we have to figure out exactly what resources we’ll need to achieve our goals. An effective way to do this is to first look at what obstacles we face, then think about the steps we need to take to overcome them.

Identify Potential Obstacles
No matter where we are in our careers, there will always be obstacles waiting to challenge our best laid plans. The key to dealing with these challenges is to anticipate them as much as possible and make sure we have the resources to push them out of the way.

The most common obstacles that creative entrepreneurs and professionals face are:

  • Lack of skills and knowledge – Are there elements within your plan that you just don’t know how to do? For example, perhaps you’ve never segmented a mailing list before, or you don’t know how to set up a customer retention strategy. In some cases, you may not even know the right questions to ask in the first place.
  • Not enough time in the day – There is never enough time in the day to do everything you want to do, especially for those creatives who have a million ideas running around in their heads. The question really becomes how much time do you need to devote for your business plan to succeed?
  • Insufficient funds – It’s a rare person, indeed, who has all the funds they want to implement every idea they’ve dreamed up. Figure out how much you need for your ideal plan, then look at how much you can actually afford to spend on implementing it.
  • No support network – As an entrepreneur, lack of a support network can be a big problem. Not a lot of friends and family understand the struggles or sacrifices you make on a daily basis. Do you have people to go to when you’re stuck or need a boost?

Overcoming Obstacles
Now that you’ve anticipated your challenges you can start identifying and putting in place the resources you'll need to counter them. You may find that you will have to adjust your goals and plans a little if you can’t get the resources you'll need. It’s better to do that sooner rather than later.

  • Focus on the skills you need – Focus on the most important skills or knowledge that is relevant to your business model; be careful not to get sidetracked. If it's not useful to learn a new skill right now or improve on an existing one, block it out.
  • Manage your time and delegate – Unfortunately, you can’t make time slow down or expand. Therefore, if you have the funds, outsourcing is usually your best bet for growing your business faster. Make sure you know exactly what you want to outsource so that you can pick the right people.
  • Budget wisely – If you are working with a tight budget, you’ll have to be creative with where you spend and where you save. Put your money into the places that will have the greatest impact on your success and think twice about the rest.
  • Build your support network – For some, building a network of friends and colleagues comes naturally. For others, it has to be a planned, scheduled activity. Check out the top online groups in your niche and find at least one where there are people you can relate to then participate and get to know the other members as much as you can.
The best way to make sure you stay on track to reach your goals is to anticipate the obstacles ahead. Take a good, hard look at what might happen to upset your plan, and what resources you’ll need to make sure each one doesn’t happen – as far in advance as possible.

BREAKING EVEN AND ROI

Once you have looked at the details involved in implementing your business idea, it's time to calculate your break-even point and potential return on investment (ROI). The break-even point tells you how much income you need to cover your expenses, while the ROI can give you an estimate of the actual profit you can expect to make.

Step 1: Estimate Your Costs
Start by estimating all costs involved in your business. These can be broken down into both fixed and variable costs. Some costs may be spread across more than one project in which case you can either divide the total cost by the number of projects you have or leave it as one lump sum.

  • Fixed costs are those expenses that you have on a regular basis: weekly, monthly, or annually.
  • Variable costs are any expenses that are one-off or only occur periodically.

Step 2: Estimate Your Revenue
There are two ways you can estimate your revenue. First is any income you have received in the past and expect to continue receiving – project retainers, installment payments and automatic renewals are a few examples.

The second way is to estimate the amount you’ll earn from new business. This is the most difficult to estimate, especially if you don’t have historical data. Workarounds include: gathering information from others in your niche as a starting point, or looking at the estimated size of your market and the average conversion rates for your business model.

Step 3: Estimate Your Time Investment
How many hours a day or week do you think you will spend on your business? For past projects, you can look at the time you put in (billed and non-billed) against the profit you made. This will show you exactly what your return was for your time. For future projects, estimate the time you think you’ll spend based on historical data.

Calculate your time as an actual expense if you want to put a specific number value to it. For example, let’s say you typically earn $50 per hour per project? Multiply that amount by the number of hours you expect to put into your new project and add that to your total expenses. That would look like this: $50 per hour x 100 hours of project work = $5,000 in expense for your time.

Step 4: Calculate your Break-Even Point and ROI
The final step in figuring out whether your business will be profitable is to compare your estimated revenue against estimated expenses – subtracting expenses from income.

Look at your expenses each month compared to what you expect your income will be. How many weeks or months will it take for your revenue to cover your expenses? That’s your break-even point.

To calculate your annual return: Divide your total profit for the year by total expenses. For example, if you earned $20,000 in sales and spent $5,000 to make it, then your profit was $15,000. Your ROI was $15,000 divided by $5,000, which equals $3 earned for every $1 spent.

FREE GIVEAWAY >>> Business Planning Worksheet: Break-Even Analysis and ROI

Even a rough estimate of how profitable a business idea will be can help you avoid a major investment mistake. Many creative entrepreneurs get so excited about their great idea that they rush in without carefully considering the monetary risks. By estimating your break-even point and estimated ROI, you can determine which of your business goals and plans are worth the effort and expense before you’ve invested too much time on them.

FUTURE REVENUE

Estimating the revenue we’ll make in our businesses is probably one of the most difficult things to do. For any projects we have that already earn money, we can just look at the past to help predict the future. But for new projects, we’ll need to look at a number of different factors:

  • Revenue – Your revenue is the amount of money you earn before any expenses.
  • Average sale – Calculate your average sale by taking your total revenue divided by the number of sales. So, if you have received a total of $1,000 for 50 sales, your average sale is $20. It doesn’t matter if one sale was for $100 and another for $10. You have to take the average of all of them for estimating the future.
  • Average revenue – Your average revenue is the average amount you’re paid for each sale times the number of sales. For predicting future revenue, you can take the average amount per sale as your standard. Then estimate how many sales you think you can make each week and month. Multiply your estimated number of sales by your average revenue per sale to get the average revenue each month. For example, say your average sale is $20 and you think you can make 10 sales your first month, 30 the second month, and 50 the third month. That means your average revenue for each of your first 3 months is $200, $600, and $1,000 respectively.
  • Target market size – The size of your target market is the number of people who would be interested in buying what you’re selling. If you’re selling training programs for new website owners, then your target market size is probably the number of people who have recently decided to launch a website and not all existing website owners.
  • Market share – Your market share is the percentage of your total target market who buy from you rather than your competitors. For example, say there are about 1,000 sales per month of the type of product or service you're selling or something similar. If you think you can get 100 of those people to buy from you vs. your competitors, you will have 10% of that market.
  • Conversion rate – Conversion rate is the number of sales that are completed compared to the number of people who see your offer. For example, imagine you have a sales page where you are encouraging people to buy your paintings. If you get 500 people to visit that page and five people buy a painting, then your conversion rate is 1%. You can also look at conversion rates for other actions you want people to take depending on your business goals.

In order to do your actual revenue estimate, you need to multiply your average estimated revenue per sale times the number of sales you think you can make each month. Depending on your marketing plans, that number would hopefully go up each month. Plot out your estimated revenue each month for each project and you’ll have your estimate for the year.

As you put together your revenue estimate and other parts of your business plan, remember that it will grow and change over time. You may find that your market share is much larger than you thought and your revenue estimate can go up. With good marketing, you might also raise your conversion rate and increase sales.

Go back to your estimates and periodically update them, but don’t obsess over being completely accurate. These figures are for your own planning, not for your accountant!

Phew… let’s not talk numbers again for a while. Would that be ok with you?

andrea hubbert

About the Author

Andrea Hubbert, principal at Hub+company, is a versatile integrated marketing communications professional with one primary passion: to empower creative individuals and their companies to design and market the business lives of their dreams.

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