Imagine for a second that you and your best friend have decided to go on a road trip together. Now, you might do one of two things. You could just get in a car and start driving without a map, supplies, or any sense of direction. The odds of you guys getting anywhere are slim to none.
On the other hand, you could plan the whole thing out from the beginning. You could plot the best route, prepare necessary supplies, and take precautionary measures in case something unforeseen happens, such as the car breaking down in the middle of nowhere.
Obviously, no plan is foolproof, and there are surprises you won’t be prepared for. However, having a plan is half the battle, and it will make you better suited to take these new challenges head-on.
Creating a business strategy is exactly like a well-planned road trip. Having a plan in place will make your entrepreneurial journey more pleasant and smooth.
As Eisenhower said, “Plans are worthless, but planning is everything.”
The same is for the world of business. If you decide to start a business without having a solid plan or strategy, you might as well try your luck at a roulette table because you’ll be gambling either way.
Step-By-Step Guide To Creating A Bulletproof Strategy For Your Business
- The Business Plan
- The Business Strategy
- The Business Model
The Business Plan
Having a solid business strategy is so important that no investor would ever put a dime into your business unless you showed them a comprehensive business plan.
Not only must this plan cover why your business has the potential to be a success, which can be shown through market research, product validation, and competitor analysis, but the plan must also detail the actual steps you intend to take to turn that latent potential into a reality.
Consequently, most business plans are made up of the following sections:
- Executive summary: This is a brief description of everything in the plan.
- Products and Services: What is it that your company sells or does?
- Marketing plan: Who are your customers? How big is the market? Do you have any competitors? How will you compete with them?
- Operations plan: What are the required operations to deliver your product or service?
- Organization and management: Who is on your team? What qualifies them to get the job done? How will you organize your operations?
- Financial plan: How do you plan to fund this whole endeavor? How much leverage do you plan to rely on and how much investment are you trying to raise? How will you ensure your cash flow?
The Business Strategy
Before writing down a business plan, you have to develop a strategy first. So, let’s take a look at how you can create a winning strategy for your business.
Simply put, coming up with any strategy consists of three main elements:
- Having a clear vision and mission.
- Analyzing the market and seeing how your business can capitalize on unmet demands.
- Figuring out the best moves and maneuvers to make the most of the market gap you are addressing.
Here’s a more detailed view of each step.
1) Having A Clear Vision And Mission
Your vision is a condensed answer to the following questions:
- Why does your business exist?
- What purposes does it serve?
- How will people’s lives be affected if your business were to close up shop tomorrow?
- What are the core values of your business?
Having a well thought out vision statement is necessary. It will act as a guiding principle for the rest of your business’s life—it’s sort of like having a final destination for your road trip.
Without it, your business would wander aimlessly, never making an impact anywhere. More importantly, a well-articulated vision can help define your company culture.
How Do You Write A Vision Statement?
Well, first off, whatever you do, do not write a generic, boilerplate vision statement. It won’t inspire anyone, and it will be a waste of your time. Instead, you need to take the time to figure out a statement that encapsulates your business’s ideals and tells people where you want to go.
You also want to make the vision audacious.
You shouldn’t worry about whether the vision is achievable or not; just make sure that it captures the sort of values you would like to see in the world.
The best visions are the ones that will never be achieved but are worth pursuing all the same.
When you’re starting out, you still might not have a clear idea of what your business does, which can make putting your vision down into words difficult. However, you should have an idea of the values you want your business to have as well as the overall effect your business should achieve within a few years.
This should be enough for you to create a preliminary vision.
How Do You Write A Mission Statement?
Whereas your vision is all about an impossible ideal that you plan to pursue, your mission statement should be more grounded and rooted in reality.
In other words, your mission statement is all about the concrete, practical steps you plan to take over the next two to five years, all in the hopes of achieving your vision.
So, once you have a vision statement, you can begin working on a mission statement to supplement it. Obviously, both your vision and mission statements can change with time, but what will most likely happen is that you will change your mission statement periodically while keeping the vision statement the same for a long time.
2) Analyzing The Market And Capitalizing On Unmet Demands
Once you have a clear vision in mind, it’s time to figure out how to turn this vision into a reality and this starts with a market analysis.
Even though there are many tools you can use to analyze the market, they all try to answer the same two questions:
- Will people buy whatever it is you are selling?
- If so, how big is that market?
With that, let’s look at how you can try to answer each one of these questions.
Will People Buy What You Are Selling?
Well, it depends. If you are selling something that has never been offered on the market before, you first want to validate your idea.
There are several excellent books that can help you with that, including:
- “The Lean Startup” by Eric Ries
- “Getting to Plan B” by John Mullins and Randy Komisar
- “Blue Ocean Strategies” by Renée Mauborgne and W. Chan Kim
That said, the gist is as follows: To validate your business idea, you need to test it out in the real world and find out whether people are willing to doll out their hard-earned cash for it.
However, given that your first attempt at creating a brand new product has a high chance of failure, you want to conduct this test using a minimal viable product (MVP), which is a no-frills prototype that tests the core of your idea and is cheap to make.
Once you’ve dipped your toes into the market with your MVP, one of two things will happen: either your idea will be validated and people will show up to buy what you’re selling or your idea will turn out to be a dud and you might need to pivot.
Alternatively, if you are selling something that is already in the market, then you kind of have proof that people are willing to buy this particular product or service.
At this point, it becomes important to question what differentiates you from the competition. If someone else is already providing a product or service, why would anyone come to you?
Answering this question is of paramount importance if your business is to have any chance at succeeding.
How Big Is The Market?
Hopefully, you already have a validated idea, and you are currently considering how many people out there would be willing to buy it.
Start with customer segmentation. This means that you want to group your potential customers into different cohorts, with each cohort representing a group of individuals with common characteristics—buyer personas.
Not only does this help you figure out how big your market is, but it also makes later analysis easier as you can treat each customer segment as a separate market.
Now, just because a market has a lot of customers doesn’t mean that you can start a business in it right away. After all, even the widest of spaces can feel suffocating if it is overcrowded with too many people.
Similarly, if a market is over-served, you want to stay out of it. Your best bet is either to create a new market by creating a new product or to try to tackle an under-served market.
One way you can identify whether an existing market is attractive or not is by using Porter’s Five Forces.
In short, Porter’s Five Forces is a strategic tool that tries to gauge the business landscape by looking at the following five factors:
- Competitive rivalry
- Supplier power
- Buyer Power
- Threat of substitution
- Threat of new entry
Once you’ve found an attractive market with this tool, assess whether you are a good fit for it.
Something like the SWOT tool can help you with this: The SWOT tool looks at your strengths, weaknesses, opportunities, and threats.
While the strengths and weaknesses are internal factors that pertain to you and your company, the opportunities and threats are external factors that look at how a certain opportunity meshes with your capabilities.
However, if you want an even better tool to analyze external factors, you have PESTLE.
PESTLE tries to look at all the relevant external factors that can either help or hinder your business:
- Political factors
- Economic factors
- Social factors
- Technological factors
- Legal factors
- Environmental factors
If you take the first letter from every factor just listed, you’ll find that they spell PESTLE, which is where this tool gets its name from.
Pestle analysis is great to look at the bigger picture and think of the worst-case scenario. That will prepare you for the unexpected, which we will cover a bit later.
Companies that have considered how the inevitable environmental factors could hurt their business are better prepared to handle the current Coronavirus pandemic and its effect on the global economy.
3) Figuring Out The Best Moves To Make The Most Of The Market Gap
At this stage, you should have a clear idea of whether there is a market for what you want to sell and the size of that market. You should also be confident that you are a good fit before moving forward.
Assuming that you’ve checked all the above boxes, it’s time to figure out how you can make your business a reality.
This will involve a few steps:
- Getting the right people for the job
- Getting the necessary funding
- Preparing for the unexpected
Here is how you go about each one of the above steps.
Getting the right people
Building the right team can make or break your business. Aside from being your primary asset, the people you work with will be the main engine behind your growth and success: They will be the face of your business, they will create your company culture, and they will be the heart and soul of your brand.
The salaries you pay will be one of the largest costs you have to shoulder every month, so you want to make sure that you are getting your money’s worth.
There are two main ways you can build a team—partnering with other individuals and hiring employees.
In both cases, there are a few criteria you need to look for to ensure a good fit:
- Technical abilities
- Communication skills
- Ability to learn on their own
- Need for self-improvement
- Leadership skills
- Critical thinking
Obviously, you won’t value all these criteria the same for every job. However, whereas some criteria are necessary regardless of the position, such as values and communication skills, other factors can go up or down in importance.
So, if you are hiring for a senior position, you might want to focus on experience. But, if you’re hiring for a smaller position, then maybe you would do better by focusing on their attitude and ability to learn.
Getting The Necessary Funding
Every business needs capital to run. You just need to figure out how much you need and where you can get it from.
When calculating your startup costs, you should begin by distinguishing between one-time payments and recurring payments that you will have to doll out regularly.
So, although you only have to buy an asset once, you will have to pay your employees’ salaries every month. It should go without saying that you will have to put up a high initial investment to jump-start your business.
As for where you are going to get the money from, there are several sources you can reach out to that are geared towards helping small businesses and fledgling entrepreneurs.
Here are a few of them:
- Business incubators
- Angel investors
- Venture capital
- Bank loans
- Government grants and subsidies
- The three F’s: Family, Friends, and Fools
- Peer lending
And, if all else fails, you can just try to bootstrap the entire endeavor until you start showing some profitability. After that, you should have a much easier time getting an investor on board.
If you are bootstrapping your venture, you cut all unnecessary spending, focus on the must-haves, not the nice-haves.
Ideally, work alone, don’t spend on an office and try to get the ball rolling and secure some initial cash flow before adding expenses.
Having A Worst-case Scenario
Even though this entire article is about planning and its importance, the fact remains that things are going to go sideways at some point and you will be surprised.
After all, the old adage says: if you want to make God laugh, tell him your plans.
Ergo, you want to do your best to prepare for the unexpected. For instance, if your business has critical data to operate (e.g. customer addresses, invoice data, etc) you need to back up this data from time to time and have redundancies in place.
Accordingly, if anything ever happens to your business’s computer, the data won’t be lost and your business won’t have to face costly downtime.
Another perfect example of the importance of preparing for the unexpected is happening right now as this article is being written. These days, the Coronavirus has been spreading across the world, ravaging the economy and bringing entire countries to a standstill.
That said, imagine how far ahead you’d be if you had a contingency plan for something just like this—a plan where you and your team members were able to work remotely and keep your doors open despite everything going on around you.
Always hope for the best, but plan for the worst, and your company will be flexible enough to adapt to different situations.
The Business Model
Once you’ve come up with a clear strategy, you might want to put it all in a single document. While a business plan can help you with that, you could also benefit from using a business model canvas.
It is a tool that summarizes a business’s entire strategy and lays it out on one large canvas. This will help you see the bigger picture and get a better sense of how different parts of your business connect.
Even better, you could use the canvas to communicate your strategy to other people.
At the end of the day, what good is a strategy if the rest of your team is unaware of it?
What do you think of the steps mentioned in this article? What else should you focus on when planning your own business in your opinion? Share in the comments!
Author: Heather Redding