Business planning is a fundamental part of starting and running a successful online or offline business. A business plan is a strategic document that manifests the principle of thinking before acting. As a strategic document it details the long term plan to be followed, covering a period of 3-5 years. A business plan is also a tactical document in that it is best constructed at a detailed level that makes the forecasts reasonably accurate over the first year.
A business plan manifests the time-honoured principle of thinking before acting. As a wiseman would ask... "How can you act when you don't even know where to begin, not to talk of where you are going to?" A business plan forces you to do the necessary groundwork or research that tells you the right point to begin, and what direction or path you should be following to run your business successfully. This activity is a risk management activity... it fills your initial ignorance with concrete, actionable intelligence.
A business plan should be flexible to allow for continuing refinements as the business is executed. A business plan should also be updated every year, to keep it relevant and a powerful driving force for your business.
This article discusses three deadly business planning principles that were introduced in the earlier article... "12 Deadly Principles of Business Planning. You Must Know These." The three principles are... the requirements principle, the objectives principle, and the motivation principle. The emphasis here is on elaborating on these principles so as to fix them clearly in the reader's mind. Basically, the principles are applied to the planning of an unnamed online business in order to provide you with a concrete example of how the principles may be applied. The name of the sample business has been omitted for privacy reasons.
The Requirements Principle
The requirements principle states that... "A business plan must comply with the requirements of funding bodies." All funding bodies have stringent requirements to be followed and these requirements are useful in themselves because they make a plan complete and rigorous when it complies with them. Therefore, even if you are not planning to seek funding it is strongly advised that you construct your business plan such that it complies with the requirements of one or more funding bodies.
These requirements often include:
Technological Innovation
Your business must be technologically innovative. For instance, the unnamed online business's web site is a technologically innovative process for marketing digital information products. While the idea of a web site is not innovative, the idea of a maximally converting web site that maximises visitor satisfaction through heightened customer service is indeed innovative. Note that the innovation is in the process not in the product - the site currently sells only affiliate products. The combination of top visitor relationship-building (i.e. branding) techniques in unique ways to achieve maximal conversions is innovative. These branding techniques include: quality content provision, seamless copy/content integration, cleanliness and friendliness of design, easy navigation, list building and informative follow-ups, use of communities or social media, and use of live site-assistants.
Presence of Technical Risk
Your business must have technical risk. This is an extension of the technological innovation requirement. An innovative project is always steeped in technical risk. For instance, a substantial project such as the unnamed online business's web site development is full of technical risk. However, the feasibility of the project was ascertained by constructing, testing, and refining several development prototypes of the site. This exploratory activity reduced the project risk to acceptable levels.
Presence of Commercial Potential
Your business must have commercial potential... or why call it a business? For instance, the unnamed online business's plan demonstrates that the business's web site project has huge commercial potential because it addresses a market that has millions of willing potential customers and it sells products that are among the most wanted in the market.
Job Creation and Retention
Your business must create or retain jobs. It is not enough to employ yourself, you must create or retain jobs for others. If you have the skills to employ the right people to your business then that is the best thing you will ever have done for your business. For instance, the unnamed online business's web site is an online business with a great deal of job creation opportunities. However, with its outsourcing philosophy, most of its jobs will be created through the outsourced companies. It is not only important to create new jobs, it is also important to retain existing ones.
Funding Needs
Your business must demonstrate its funding requirements. Funding bodies must know why you need the money and for what. For instance, the unnamed online business's business plan demonstrates the funding requirements of the business, highlighting the role of external funding as a small percentage of total funding needs. The major portion of the funding is provided in-house through the CEO's equity.
Balanced Funding Sources
Your business must have balanced funding sources. This means that it must be funded from various sources. This makes it easier to find funding. For instance, for the sample unnamed online business, total funding needs are provided through in-house and external funding. In-house funding is provided largely through the CEO's work equity, while external funding is provided via one or more of grant, investment (friends/family, angels, or venture capital), or loans.
The Objective Principle
The objective principle states that "A business plan must have clearly defined objectives and it must accomplish those objectives." The objectives principle asks the question... What is the busines plan trying to achieve? A business plan is prepared to meet some set of goals, and it must accomplish those goals. The objectives of a business plan are the same as the objectives of the business it describes. For instance, the aim of the unnamed online business's business plan is to plan and design an autopilot cash-generating system that maximises profits by minimising costs and maximising sales. At the end of the plan there will be a blueprint for reconstructing the unnamed online business's web site and for running the business to achieve its strategic aims.
Designing an autopilot system means substantially automating the system, and that means employing a web site as well as outsourcing traffic generation and other supporting activities. The use of a web site and of outsourcing minimises costs while maximising effectiveness. Sales are maximised through effective customer service and branding, and through maximising growth via the strategic pursuits of scalability, leverage, focus, and outsourcing.
Scalability means being able to expand easily or without much work. Leverage means being able to achieve more for less work; e.g. achieving high profits for only a modest work input. Focus means concentrating attention on one key thing at a time and doing it extremely well before moving to the next key thing. And outsourcing means delegating work to external specialist businesses who have far greater experience, efficiency, and effectiveness in the work area.
The Motivation Principle
The motivation principle states that "A business plan must have clear motivations which highlight its significance." The motivations of a business plan are the reasons for constructing the plan. As such they highlight the significance of the plan.
For instance, the motivations of the unnamed online business's business plan are as follows:
1. To act as a guide to action, a blueprint for business execution.
2. To act as a web design and optimisation plan, a blueprint for reconstructing and optimising its web site.
3. To be a framework for comparing actual performance against planned performance.
4. To be a reference point for yearly strategic planning of the business.
5. To act as a funding document, a focal point for generating business financing.
6. To act as a clarity-inspiring document. The world of online business is full of hype, with the blind leading the blind; and scam artists are legion. To succeed, it is necessary to cut through the noise in order to strike at the heart of the secret knowledge and doctrines that drive the privileged 2%-5% of businesses that make it online. The unnamed online business's plan embodies research, web site development, and market tests, the combination of which engenders clarity of thought and confidence in the future.
Final Remarks
This article has described in some detail three master principles of business planning. The principles are... the requirements principle, the objectives principle, and the motivation principle. The emphasis has been on elaborating on the principles using a concrete business planning example, the idea being to fix the principles in the mind of the reader. If you are planning to start a business you'll be foolish to ignore these principles. And if your business is failing then these principles are more than likely contributing to its failure.
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