This is the third article in a 4 part series.
Now that you have a plan to keep a house over your head and food on the table and understand your marketplace and costs, it is time to come up with a plan. How will you serve your marketplace in a way that gives you a competitive advantage? This is the answer to “Why would I want to do business with you?”
This plan should cover the first 12 months of your business. In my opinion, anything beyond that is way too speculative at this point and time is better spent elsewhere. The plan should at least answer the following questions:
- Who is your customer?
- Where is your customer?
- How you will prospect for new customers?
- How much cash do you need? (double it.)
- When and how much will you pay yourself? (This one can be tricky. Businesses ultimately die due to lack of cash. Cash is oxygen. Cash is also a safety net for bad months, bad quarters, and bad decisions. My recommendation is to set a goal of at least 90 days of operating expenses as cash reserves before you start paying yourself.)
Your plan should also include a list of key performance indicators and the industry standards for those indicators you gathered during your market research. Examples of these are:
- Average revenue per customer
- Customer churn rate or retention rate
- Average margin per sale
- Revenue per employee
- Customers per employee
- Net profit
You should also write down what you want out of the business. Is your goal to build the business and sell it, or is your goal to build a family business? While you need to focus in the beginning on just building a good, solid business, this is an important question. The answer can impact decisions as you move forward.
Take a moment to think about what type of organization you want to build. I’m not talking about what type of business from an industry you want to be in. I’m talking about the personality of your company. What personality do you want your business to have?