6 Critical Questions Your Business Plan Must Answer
There is no denying that Business Planning if often a dry topic. However, you should never underestimate the importance of a business plan. They are the backbone of your company, a foundational pillar from which your enterprise will be built. Not only does it serve as a first impression for potential partners and investors, it also acts as a roadmap for your whole business.
In some ways, writing a business plan is easy- there are no particular rules or requirements for length, format, or presentation. However, your content, asking the right questions and getting the right answers is critical if you want to lay the groundwork for a stable, successful business.
Here are 6 questions your business plan needs to answer;
- What needs are you addressing?
This is an important question because it extends beyond the simple “What does your business do?” It’s one thing to outline your business in general, describing what products you make or what services you offer, but if you want a solid business plan you have to take it to the next level.
It’s nice to imagine your business as providing something useful, and if you’re excited about the idea, it’s much easier to think about people buying it. But you need to be logical and critical when you consider the driving force behind your customer’ purchasing decisions: what fundamental customer need is your business addressing? You’ll want to back this up with research that shows the need actually exists.
- What makes you different?
It’s a big world out there, and start-ups are constantly coming on and off the radar. Chances are, there are multiple businesses out there who are already serving the crucial need you outlined from question one. That doesn’t mean you can’t serve it better, or serve it in a different way, but therein lies the challenge- figuring out what makes you different.
First, you’ll need to acknowledge all the major players in your space, and this is going to require some research. Acknowledge what they’re doing right, what they’re doing wrong and how they’re going about their business. Identify the differentiating factor that will allow you to stand out, and emphasize it.
- Who is your audience?
Here’s a hint: the answer can’t be “everybody.” No matter how useful or practical your product or service is, there’s no way you’re going to be ale to sell to everyone in the world. Think about factors like age, sex, education, geographic location, working status, martial status, and perform some preliminary marketing research to determine the best path forward.
Your key demographic may evolve over time, so don’t stay too committed to one niche. Also remember, that it’s easy to expand to other markets once you’ve established yourself in one, so if you have multiple key demographics, it may be wise to focus on one to start things off.
- How is your business going to make money?
This seems like an obvious question to answer, but you’d be surprised how many entrepreneurs fail to elaborate on their plan. The brief answer to this question is “sell products/services,” but how are you going to sell? Where are you going to sell? How much are you going to sell for?
The other side of the question is what are your operating expenses? Who are you going to pay? What services or partners will you need to pay for? And ultimately, will the amount you sell be able to surpass the amount you owe? When will you break even?
- How will you promote your business?
Promoting your business is just as important as creating it. Otherwise, people will never know who you are. Your marketing strategy should start off based on what similar businesses before you have done. Do they rely on traditional advertising or online marketing? Do they attend tradeshows and local events, or use technology to spread the word about their existence?
- What do you need to get started?
For many potential partners and investors, this is the bottom line. All businesses have to start somewhere, but that starting line varies dramatically from industry to industry and from entrepreneur to entrepreneur. Do you need any advancement equipment? Who will you need to hire? How much will you need for an initial run? These questions should give you an idea exactly how much capital and what resources you need initially.
It may seem counterintuitive, but answering these questions isn’t a one-time process. Your business plan should be a living, changing document that evolves along with your company. Throughout your course of business, you’re going to encounter new challenges, new opportunities, and hundreds of factors you never considered as significant to your business when you were writing the initial plan. To survive, you’re going to have to revise your answers to these questions and update your business plan accordingly.
