How to Optimize Your Business Plan for Growth
Whether you’re just starting your business or coming back to fine-tune the details, crafting a business plan that is optimized for growth has clear advantages. Business plans that are optimized for growth stand a better chance of attracting investors and they’re more efficient than the traditional business plan, which is aspirational rather than strategic.
But with more and more businesses jumping into the game without a plan at all, you may wonder if it is necessary to devote the time to this endeavor. Isn’t it more expedient just to get started and learn on the fly?
The research says no. A recent survey conducted by the business planning software company, Palo Alto, shows that companies that take the time to write business plans are nearly twice as successful as the ones that don’t. This is true whether the goal is seeking capital or optimizing growth.
Business plans help you to clarify objectives, allow for greater agility and expose your ideals to the harsh truth of reality. And if your primary goal is business growth, they can clearly delineate the roadmaps that will get you there.
Consider Business Structure
Most companies focused on growth are looking to attract funding when they write their business plan. If you hope for venture capital funding, your best bet is to register your business as a C-corporation.
Unlike an S-corporation, which is limited to business operations in the United States, or a limited liability company (LLC), which does not exist in perpetuity as a separate entity, a traditional C-corp is the best business structure for limitless growth.
Although you can always change your business structure as the company expands, coming out of the gate as a corporation signals your intent to dominate.
Incorporate Growth Strategies
When it comes right down to it, though, your growth strategy is the main thing investors want to hear. Your business plan should address the following common strategies for growth:
- Market Penetration
Market penetration is increasing the market share for your existing product or service. Your business plan needs to consider how to accomplish this goal, whether through lowering the price or using marketing to attract more buyers.
- Market Expansion
Market expansion is the process by which a company finds new buyers for its product or service, moving beyond the existing market. This is an important consideration in cases where there may be saturation or too much competition in the existing market. Sometimes your business simply cannot grow if it cannot expand beyond its current market, and a business plan that is optimized for growth will address this eventuality.
- Product Development
Although it is smart for any small business to start with a single product or service, business growth is contingent on the ability to offer more products and services in the same line, or at least to expand the features, as a means of increasing revenue within the same market. Your business plan should also address how changes in technology might call for the development of new products or services.
It’s best to tread lightly when discussing diversification as a strategy for new businesses, limiting growth strategies to existing products or markets. For an established company, however, diversification may be an attractive value proposition, especially if the company has brand recognition.
The Devil in the Details
Whatever growth strategies you emphasize, your business plan needs to be backed by data. You must understand the market share and your operating costs, among other things, in order to project growth and profit. Essentials to include:
- Marketing Strategy
This is where you identify and demonstrate your understanding of the demographics in your key market, then articulate how you will use marketing to increase market share.
- Financial Information
Potential investors want to see two years of income projections, monthly cash flow projections, and annual balance sheets. You should also include a break-even analysis, showing at what point your company is projected to turn a profit. These figures should support the amount of money you are seeking to borrow from lenders.
You should provide an organization chart outlining each individual’s involvement in the day-to-day operation of the company. Depending on the type of business, you may also need to supply details of manufacturing and logistics. For companies with a physical location, you’ll want to include hours of operation and the projected number of employees your business needs to run smoothly.
Ultimately, a business plan that is optimized for growth needs to demonstrate both agility and deep knowledge of the industry and target market. Investors want to know that you can survive a pivot, but they also want the assurance that you have performed due diligence. Your business plan should alleviate both concerns.