Should you have a 3 or 5-year business plan?
A business without a plan is like a thoroughbred without a jockey.
We’ve all seen jockeys fall off and the horse either stops, runs back towards the starting gate or continues with the group but never comes out in front.
Many businesses hit the ‘three-year itch’ where their ‘jockeys’ start to fail, says business mentor Craig Stevens, Director of Company Compliance and Advisory Services Australia (CCASA).
“I start off by saying I want to see a one-year plan first,” he says.
“It’s great to have a three to five-year plan, but if people don’t know what to do in the first 12 months, how are they going to get to three of five years?”
Stevens says some businesses only suit a 12-month plan.
“There’s a teenager in Sydney who uses drop shipping (where the seller doesn’t hold stock but takes orders, buys from the manufacturer and ships direct to customers) and he’s made millions of dollars,” he says.
“So, for him a business plan would be set up a website, look at the current market, look at what’s being sold and what’s coming out.
“He’s constantly researching products and then he finds a supplier in China who will deliver one item at a time and you order and pay through his website.
“His business plans would suit one year because he only deals with what’s currently taking off and as soon as the sales go lower, he throws it in the bin and goes for the next one.”
You want a business plan that will take you past the three, five and seven-year itches. Even if you want to get out of your business, you need to have a plan with an exit strategy.
You can find business plan templates online, or you can find a mentor.
Regardless of how many years your plan is for, it needs to include the what, how, why, who, when and where.
Stevens suggests including the following:
What you want to achieve
If you’re having trouble, brainstorm many things you’d like your business to achieve. Also write down your values as a person so that you can align your business. Then narrow it down.
What’s your budgeted cashflow?
If you’re buying a product at x cost and sell it at y price, you make a profit. How much do you need to sell to cover your costs?
The same principal applies to services. If you’re deciding your business will be your full-time role, then how much money do you need to pay all your bills and still put food on your table.
Take a holistic view
“For me, it’s not just about what you’re trying to achieve in business, but what do you want personally,” Stevens says.
“Will your enterprise support both itself and your private needs as well?”
Consider your target market
By asking questions and gathering data on your customers, make up a person, or several different people who will use your product.
Consider the following when you develop personas for your business:
- How old are they?
- Where do they live?
- What hobbies do they have?
- Where do they visit?
- What TV shows do they watch?
- What do they wear or look like?
- What music do they listen to?
A national IVF fertility company has created a very specific customer character and they break every decision down to ‘what would Sharon want?’ or ‘how will Sharon be affected by this?’
Where’s it going to come from? Do you need to borrow? What’s the interest rate?
What’s going to make you different?
“If there’s 100 people doing the same job, how are you going to stand out in the crowd of your target audience?” Stevens says.
Read your competitor’s website and advertising material. Buy their product and consider the following:
- What do they charge?
- How are they doing it?
- What are they trying to achieve?
- Get your team to pull apart the competitor’s product. Know it inside out.
Get feedback on your product. Stevens recommends giving a potential customer a product for free, in return for them telling you exactly what they think of it and how it could improve.
“They’re happy because they get something for free, and you’re happy because your product and marketing material is in front of the decision makers,” he says.
“This research never stops.”