This is Part 3 of UmmahHub’s series on Being Your Own Boss that reveals the keys to help you become a successful entrepreneur and be the best you can be in business and in life, In sha Allah.
In Part 2, we’d discussed how you can find a business idea that will serve the market and your personal goals and included a real life case study to show you how. In this part, we’ll explore how to write a business plan based on your answers to a set of 14 questions.
Once you have a business idea, what do you do?
Moving forward with your business idea
Building a start-up is difficult, hard and messy. This is no linear path. It involves a lot of experimentation. A business at the beginning is nothing more than a hypothesis. As an entrepreneur, your job is to validate if the problem you are trying to solve is indeed a real problem.
The challenge many entrepreneurs face and the reason many fail, is wasting time building a product or offering a service no one wants. To reverse this problem, the key is to understand the problem and to develop a solution. Once you have the correct understanding of the problem you are trying to solve, the solution won’t be hard.
The traditional business theory is to spend a lot of money on a product and try to sell it. We want to show you an easier way to identify your problem, build a product in a shorter time-frame, save more money, find customers faster and reduce risk of failure.
This method is called the “lean startup methodology”. It is a contemporary business philosophy started by Eric Reis, who adopted the work of Steve Blank, a veteran entrepreneur from the Silicon Valley. His method is that you focus on building a very basic product he calls the ‘minimal viable product’ and releasing multiple versions of your product or service over a period of time as you improve on it based on customer feedback.
The next article in this series will focus on creating a roadmap for building a product and finding these customers, but for now we will focus on applying the ‘lean startup’ method to mapping out a simple business plan to give you a bird’s eye view of your business, which will get you to launch your product or service as quickly as possible.
What type of business are you running?
There are two types of business you can run:
1) Product-based business: This can be an online product such as a software product or a physical product such as computers, clothes or food. The goal is sales of your products.
2) Service-based business: “You are your product”. Whether you are a graphic designer, attorney or a consultant, you are essentially selling yourself. The goal is understanding what your clients truly need and fulfilling their expectations within a given time-frame.
Developing a business plan: 14 questions you must answer
Whether you are explaining your business to a friend or pitching it to an investor, you need to be able to explain your business in 30-90 seconds. If it takes you too long to explain what your business is and what benefits it has, it’s too complicated. Instead of writing out a long business plan, the goal is to keep your business plan short and simple. Remember, the key to building a ‘lean’ business is to do the absolute minimum you need and get in front of customers as fast as possible. With the following steps, whether you decide to build a product-based business or a service-based business, it will give you the necessary foundations of a solid business map.
You need to consider the following. Grab a pen and write out the answer to each question:
1. What is your product or service?
Action Step: Try to answer this question in no more than 1-2 lines.
2. What is its unique value proposition?
Action Step: In other words, what makes it different or better? Not that it’s the first of its kind. What makes it better?
3. What’s the market opportunity? What problem will you solve?
Action Step: Clearly define exactly where the opportunity is in the problem you are trying to solve.
4. How large is the market?
Action Step: In other words, how much money is being spent in your industry? Look up academic studies or industry websites or magazines for approximate figures.
5. Who are your competitors?
Action Step: Do a search on Google and pretend you’re a customer looking for the service you are offering. Are there other websites that are offering the same services as well? Take a look at their website.
6. Who are your customers?
Action Step: Create a customer profile. In order to sell to your customers or future clients, you need to know exactly who they are: age, demographics, education, income levels, geographical locations, their interests, behaviours, what they like or don’t like, etc.
7. How do you make money?
Action Step: This is known as your business model. Exactly how do you intend to make money? Retail sales? Wholesale?
8. Who is the management team?
Action Step: Who is on your team? You can be the sole founder or start your business with a partner. The key is for your partner to possess a skill that you don’t have. You want to have a partner whose skills complement yours.
9. What is the strategy? What’s the long-term goal (10 years)?
Action Step: Strategy is how you get to your vision. When you understand what your product is and what problem you are trying to solve, where do you intend to go? Do you want to create a small home business to create income for you? Do you wish to expand your business into a franchise or large corporation? Where is the end goal for your business?
10. What are the 3, 6, 9 and 12 month milestones?
Action Step: Look at where you intend to be. Write out a 3-month, 6-month, 9-month and 12-month roadmap of where you wish to be with your business. It will help you create a vision that will inspire you.
11. How do you sell/market your product/service?
Action Step: How do you get people to buy your product? Research and make a list of where your customers are.
12. How much capital do you need/intend to raise?
Action Step: Think about how you will raise money for your business. Will you bootstrap? Will you stick with your job and save money for a few months until you can fund your business? Do you intend to find investors, such as venture capitalists, friends or family to help fund your business? Look at how much you will need to get started and that will give you a good idea of what road you will need to take.
13. What are the projected financials for the company?
Action Step: How much money do you predict to make with your company? It’s important to look at potential revenue and profits you expect per month and per year. These expectations will map out a financial plan that will keep you on course until you reach your desired income.
14. What is the preliminary valuation of the company?
Action Step: For many companies, the question of valuation normally arises when one is looking at outside sources of investment, such as venture capital or seed funding. The valuation of the company, or how much the company is worth, is an important measurement to know. In exchange for funding, you will have to give away a percentage of your company. To measure the worth of that percentage, you will need to know a valuation. For example, if you give away 10% of your company for an investment of $100,000, then your company’s valuation is $1 million.
Once you’ve completed this, try your best to plot your answers on the Lean Canvas model below. It will give you a visual map and help you make connections about the value you are trying to add to the marketplace.
To better understand how to use this, here is a free course on Udacity that will take you step-by-step on exactly how to map out your business plan on a Lean Canvas Model. Mapping out a business plan this way is different than the traditional route. You will be able to start your business with much more ease, having saved money and time as well as being able to communicate your value proposition to your team and external stakeholders.
In the next part of the Being Your Own Boss series, we’ll learn how to launch your business idea. We will cover the basics on how to build your product and service and a variety of funding models to help ensure you have the money you need to start your business. How does your business plan look after answering all 14 questions? Let us know in the comments section below!
Do you want to learn how to start a successful business? Join our 6-week course designed for Muslim entrepreneurs looking to start, launch or grow their business with guidance, mentorship and support of an expert community of successful Muslim entrepreneurs. Use the coupon code “PRODUCTIVEMUSLIM” to get 50% off our upcoming course: Sunnah of Start-Ups: Muslim Business Mastery.
(This article contains affiliate links)