Most entrepreneurs do not have a formal planning process; they operate their business informally and implicitly. In other words, they do not have a business plan that they can share with other stakeholders who contribute to the growth of their business – employees, advisors, investors, shareholders, or family.
The direction of the business is determined by wherever the owner(s) wants it to go. The business plan articulates this vision and what the owner(s) want the business to do.
Your Business Plan comprises the following elements:
A. Business Definition
B. Setting Objectives
C. Operational Capabilities
D. Financial Management
I want to speak of the importance of your business definition as the starting point for an effective business plan. The business definition comprises your vision, mission, values, operating principles, and the business opportunity.
It is critical to consider the vision for your business. Your vision describes the goal(s) towards which you are working. The clearer you are about your future direction, the more likely you are to achieve it.
To get clear about your vision, consider your answers to the questions:
- What do we want to achieve?
- What will our organization look like 5 years from now?
- What will our revenue be? Who will be part of our team?
Your mission articulates the purpose of your business. It answers the question, why are you here? An effective Mission Statement starts with the benefit(s) to your clients/customers.
Ideally, the Mission Statement has meaning for every stakeholder in your business. It tells them the purpose of the business and why it makes a difference for them.
Values speak to what matters. Consider what is most important to the business in terms of how it engages with its clients and key partners.
The two most important indicators of what we value are how we spend our time and our money. Is service excellence a value in your business? Are you demonstrating that through how you budget and how you treat your clients?
Making effective use of your values relies on turning each of your values into a sentence or paragraph that describes how the value will be implemented. These are your operating principles.
If one of your values is teamwork, then an operating principle could be: “The team will meet on a weekly basis to ensure that everyone is informed about issues that affect the business. These meetings will give us an opportunity to share information and knowledge with each other, address any issues or concerns, and make sure the team is focused on doing all the right things to move the business forward.”
The final element of your business definition is to identify your business opportunity. Your Business Opportunity highlights the areas of greatest potential in growing your business. It answers the questions:
- Where do you make your money?
- How do you spend your time?
- Who do you sell?
- What do you sell them?
Articulating each element of the business definition sets context and describes the purpose in building your business. Context, by definition, means how this all ties together.
The articulation of your Vision, Mission, Values, Operating Principles, and Business Opportunity ties together the goals for your business, what is important to you (purpose) and the opportunities in your chosen market(s). You also make formal and explicit your mental picture of what you want the business to become.
If you want to learn more about how you can effectively uncover the areas of greatest potential in growing your business, head to our blog Business Plan: Defining Your Opportunity.
