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How to Develop a Business Plan – The Key to a Viable Business (Episode 73)

Dave Lavinsky is a serial entrepreneur, having founded several companies in industries from consumer products and services to software, websites, and technologies. He’s been running Growthink, a consulting information products firm, since 1999 and in that time has helped over half a million entrepreneurs and business owners. His main areas of expertise are developing business plans, raising capital, and methodical and sustained growth. He’s also written a book called Start at the End about how companies can grow bigger and faster by reversing their business plan.

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How it Started

Lavinsky was at business school from 1997 to 1999, which coincided with the rise of the Internet. Many of his classmates at that time were creating and launching internet companies. He discovered he had a knack for developing business plans, a skill that every entrepreneur needed. He began helping his classmates with business planning.

At the same time, he had jobs working in local juice bars just to earn some money, and he wanted to launch a smoothie that would be sold in supermarkets. He worked on planning that as well. One day, his wife came home and told him she was pregnant, and that’s when he decided he needed a more sustainable income. He decided to create business plans for customers on the side while he pursued his smoothie company.

The Los Angeles Times wrote an article about his budding business. The day it was published, he got a flood of emails and calls that really took his business off the ground, and showed that there was a real need for the services he was providing.

Keys to Growing the Best Companies

Lavinsky has spent a lot of time understanding what makes the best companies, and for him, two things stand out.

  • Great People. Nobody can create a successful business on their own. Finding the right people to bring in new ideas and perspectives is crucial.
  • Great Systems. The business should run smoothly without you. Organization and time management are all aspects that technology can help with.

With these keys, entrepreneurs can focus on growing a business instead of the day-to-day intricacies of running it.

How Technology Has Transformed Business

There have been two major developments that have transformed the business world. They are social media and smartphones. These technologies have changed how people communicate, consume products, and store information.

Social Media

Lavinsky believes that every business owner should have a good grasp of their consumers’ use of social media and how best to leverage it for growth. Social media campaigns can be effective for increasing brand awareness for consumer products and interacting with customers.

Smartphones

Enterprise and consumer-based businesses should create products, services, and communication techniques that work well in a mobile environment. While typically enterprise customers will interact through traditional computers, the transition to mobile should still be seamless.

The Power of Content

Content marketing is a vital part of developing business plans for modern brands. It allowed Lavinsky to transition his company from a service provider to a product provider, which creates a more consistent revenue stream- products are much more scalable than services are. He has also found that many businesses are in need of content to promote themselves on the Internet.

Reducing Churn

It costs seven times more to onboard a new customer than it does to retain an existing customer. Business owners should be willing to spend money to keep existing customers by investing in that relationship. Showing reciprocity can help customers develop loyalty and good favor with you, which will reduce churn. In addition, do research on people who do leave to see what their reasons were to end their relationship with your company. Once you find areas that are causing a lot of churn with your customers, you can implement policies to fix those problems.

Writing Great Business Plans

A good plan should be able to, concisely, explain what the company will do. Lavinsky has talked to many entrepreneurs who cannot answer that question well, and that is the first sign of trouble. A sentence or two that defines the company will help create a sense of direction. It will also be harder to get customers and capital if others struggle to understand what you’re trying to do.

The second element is an entrepreneur should be able to answer this question: why are you uniquely qualified to succeed? This can include things like experience in the field, relationships with customers, contacts with potential business partners, etc. The exercise of answering this question can itself lead to better ideas for business growth.

Funding a Business

With cloud computing and the internet, it has become cheaper than ever to start a business. This means that entrepreneurs can start with virtually no money, but there is also more competition in each space.

What Lavinsky finds particularly interesting is the rise of crowdfunding. Gone are the days when a few wealthy people decided which businesses would make it to market. Now, funding is democratized with anyone able to chip into an idea they think will do well. This also provides a great market research opportunity for budding business owners: if people contribute to your fund, it means they’re interested. Otherwise, you get your first indication that this idea might not work with consumers.

Tips For New Entrepreneurs

Lavinsky has the following advice for anyone starting out developing business plans for a new venture:

  • Don’t be afraid to share your ideas. It’s not the idea that matters, it’s the execution. Let people support you and give you feedback early and often.
  • Don’t act on a new idea right away. Think about it over a few weeks and really consider if it will work.
  • You don’t have to write your business plan until you know you have a viable product. After that, it’s worth writing one to create a roadmap.

With these tips and a solid idea, entrepreneurs will be well equipped to begin creating an actual business and driving it successfully to market.