Episode #17 brought you the second installment in our 4-part series on developing a business idea and plan. This episode focused on the step prior to the Business Plan and was aptly named, Business Planning. If you’d like to hear the full episode, catch it on iTunes or Soundcloud. The episode built on episode 16, Developing a Business Idea, so go back and check that out if you haven’t already.
We don’t believe that a business plan is always required, which isn’t necessarily commonplace. We believe that sometimes taking action should come first. This is often contrary to most school’s of thought, which strongly encourage a well thought out plan before testing the idea.
In our view this is counterintuitive for the evidence based practitioner. In order to practice with the most updated science, we must hypothesize and test. Same goes for a business idea. Furthermore, if your idea is original or revolutionary, you’re going to struggle to find the data to legitimize it.
“Part of planning your plan is planning what to do with it.” — simply meaning, knowing what you need out of your business plan helps us to determine what to plan for — what will be the purpose of your business plan:
- Raising Money
- Most authentic reason for needing a business plan
- Focus should be on how your idea will make money
- You will likely need to give away equity or future profit in exchange for money:
- Venture Capitalists: or VC’s provide private equity to start ups or small businesses that are typically deemed to have high growth potential.
- Angel Investors: Individuals who invest money in your business, but don’t necessarily want to be part of the operations. They essentially give you money out of the goodness of their heart, not necessarily for monetary return.
- Incubators: This is less about funding and more about resources. This is essentially a place to grow your idea for a much less expensive price with more resources.
- Crowd Funding: this is the kick starters & Go Fund Me type campaigns. Typically something is pledged in return for money, though rarely (if ever) is it equity in the idea (which is a good thing).
- Loan: You could take out a small business loan, which is just debt, without equity of the idea attached to it.
- Attract personnel
- Plan is usually focused on growth potential, ability to sell, or go public
- Marketing and scalability strategy will be important
- Have well developed 4 P’s
- Also remember: “Business plans can be helpful tools to clarify … business activities, [but] they … encourage entrepreneurs to focus on what they are going to do.This overlooks two more important questions: ‘why’ — why it exists and why employees would want to get out of bed in the morning, and ‘how’ — the values of the business, what it stands for, how people representing the business will behave.”
- Moral Compass
- Focus will be on vision statement, core values, and mission
- At minimum, your business plan should act as this for your idea
- This should serve as your decision maker for all levels
Road-test your business idea. There’s no point in spending time on a formal business plan if you’re not even sure there’s a market for your idea. For those who went through a master’s thesis or have ever conducted research, you know that only so much can be hypothesized prior to collecting data. It is not until you actually conduct the research that you determine the viability of your idea.
The take away here is that traditional thinking should be challenged. If you have a great idea, but are stopped at the business plan phase, blow past it and come back once you have acquired some real data.
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