Ask not what you can do for your business plan. Ask instead what your business plan can do for you.
Questions about pricing, hiring and other factors can put you in trouble. A detailed and revised business plan should help you answer these questions. Getting these answers will not only help your company to achieve short-term milestones but will also help you to keep an eye on your long-term business goals.
Here are five key questions and how your business plan should help you answer them:
1. Is my price right?
There are two essential components of pricing that should be included in your business plan:
i. Consider whether your price is in line with your marketing message. If you are offering a high quality product or service, you cannot charge a low price without contradicting your own marketing message. You should set your prices according to the relative value of your offer, or risk confusing your potential market.
ii. Your business plan should include revenues and costs on a per-unit basis, your overall direct costs and overhead. These factors can help you establish the constraints related to making enough profit. You have to cover costs, which can include expenses beyond the direct costs of buying what you sell, such as rent and payroll.
2. Can I afford to hire?
Especially when you are running a new company, you think to hire additional employees as they might help you with the mounting list of tasks that have to get done.
But wait, What would happen if you had hired an extra salesperson? Could an extra administrator solve some of your problems?
Go back to your business plan and determine what happens to projections if you add the extra salary and benefits. Check whether the improvement in people power will add to your revenue, or cut costs.
Instead, you should consider hiring a contract worker. Of course, hiring someone is almost always cheaper but only if there is a long-term need that justifies adding the fixed costs. If it is a short-term need then the cost won’t affect your overheard forever.
3. Am I implementing my strategy?
Test your strategic alignment: Do your milestones, spending for marketing activities, product or service development, and related expenses show the same priorities that are reflected in your strategy?
Generally, business owners say one thing in their strategy but do something different thing in their actions and spending.
For example, assume that you think to emphasize your extensive computer expertise in your strategy. But, you pay your service staff below market rates.
4. Can I afford to relocate?
Sometimes new business owners need to relocate to help cut costs, or want to take better advantage of a prime sales area. If you need to switch your location, get back to your basic numbers and break the problem into its business plan parts.
Estimate how much more your monthly rent will be at the new location. Also estimate your moving costs, costs for fixing up the new location and costs of the business lost while you are absorbed in the move.
Then adjust your sales forecast to either add in the additional business you would be able to do there or the costs you would be able to cut. If you don’t see enough long-term improvement, then perhaps you should not relocate.
5. Am I stunting my own growth?
Go back to your business plan and give your assumptions a fresh look. Consider your target market and strategy, and add in your business offering and distinctive differences.
Does your business offering match your market? Are you sending the right messages to the right kinds of people?
Think about things could easily add on to sell more per customer. Is there are any low-hanging fruit that you are missing?
Now look at marketing. Is your message changing enough to match changes in the market? Is your marketing mix adjusted to technology, media and social changes? What if you spent more money and time on marketing, could you increase sales?
Your business plan is not a static document, it’s your best tool for steering your business. Answering these questions periodically can help you to keep long-term goals in mind while you adjust your immediate steps and actions.