Business Planning DEEP DIVE (Pt. 1)
About four years ago, I created The Easiest Business Plan Ever. Over the past four years, it's been downloaded by thousands of people just proving how easy it can be to create a solid strategic plan for your business. I've made several videos, about Business Planning. Most of these videos were 20 minutes long but up until this point, I've never gone very deep with any one section of my business planning process. We've gotten so many questions about different parts of the plan, that I'm going to do a deep dive into part one of business planning.
We're going to be working through part one, which is the business overview, and this section covers things such as your business name, legal structure a basic description of what you're doing your company's mission, the location you do your business from, and something called the chart of accountability, we'll get much more into that later on.
1. Business Name
The first section, you'll find in the business overview is the business name. You're going to just write down the name of your new company. You might already have decided exactly what that name is going to be, but if not, this may require a serious amount of thought. For your business name, you could choose to use your own name or you could use a descriptive name that explains what your company does, or you could use a proprietary name.
So let's talk about what each of those types of names are and why you might choose one over the other. You might consider naming your business your own name, and that can be a really easy choice, and it can be a great choice for building a strong personal brand. However, there is one big drawback of that, and that is that if you name your business your own name you will forever be tied to the business, meaning you'll never be able to sell it or fully hand it off or delegate all the tasks you will have to be the face of the business forever, so that's just something to consider. But you still could choose to use your own name. That's what I've done with my personal brand and many other personalities online have made this choice as well.
You could choose to give your business a descriptive name. A descriptive name is a name that describes exactly what sort of business you run. Something like “affordable home cleaning,” “top-notch SEO services,” or “premium virtual assistance.”
You could name your business a proprietary name. This is a name that is unique to you and your company, it's more like a name that a person has. A few examples of this might be, Amazon, Google, or Canon, the camera company.
And finally, one more option you can consider for your business's name and one of my personal favorites is to use a combination approach. Where your name is part proprietary and part explanatory or descriptive. This could be something like Startup Society or Veritas Web Design.
I like this option because it has something that is unique and memorable and sets your brand, apart from the competition, enabling you to build your brand and more easily build your company, but at the same time, it includes a part that is descriptive and that can go a long way towards telling your prospective customers how you can help them and getting them initially interested in your business when they see that it's what they're looking for.
The next section you're going to choose is the location. Now, I know that many of you are starting online businesses and you might immediately think that either your business doesn't have a location, or your location is simply your website, but it actually gets a little bit more complicated than that. Your business actually may need up to three locations, and I'm not talking about three separate storefronts.
The first type of location that your business will need is the actual physical place where you run your business. If you are running an online business on your own, then that place maybe your home. I know that you may be leery of using your physical home address as your business address, but don't worry there are some options there but the government does typically require that you have a physical address you do business from for tax reporting purposes at least, and that is the address, you'll need to use to file your business registration.
The second type of address you'll need would be a mailing address and this is a great option if you are running your business from home so that you don't have to publish your home address on the internet for the public to find, so you can get a P.O. box as your mailing address.
The third type of address that you may need is an address where your customers visit you. Now, if you are running a local business, this might be a physical address, but if you're running an online business, then this address might actually be your website.
3. Legal Structure
Next, You'll need to determine your business's legal structure. I know that you might think that this is going to be the most complicated part because you don't know anything about legal business structures but actually I don't think that's the case. Once you understand what your different options are, you'll find that this is really quite easy.
So first, what are your options here? Well, you could be a sole proprietorship, which means you are just doing business as yourself, or you could have a partnership, or you could have an LLC, or you might consider having an S corporation.
Let's break down what each of those is the first thing to consider is just are you going to be the sole owner of your company, or do you have some partners, if you have one or more partners, then you're going to need what is commonly called a partnership, but generally is technically an LLC or Limited Liability Company, each of the different owners of the company will be considered a member of your LLC.
A quick, but important note here, I am not a lawyer or an attorney, and this information is not meant for any sort of legal advice, so please consult your own lawyer or attorney before taking any legal action.
If you are doing business on your own then you have a few different options, you can run your business as what is called a sole proprietorship, and if you're using your own name in many states, you actually don't need to register your business at all as a legal entity. You, yourself, are your business. However, if you're using a name other than your own name, a made up of business name, then you will need to register that business name in order to be able to legally do business under that name.
Now, if you want a little bit more protection so you're not just running your business as yourself, then that is where the limited liability company can come in, you can create an LLC yourself, or you can have a lawyer do it for you. This will create a separate entity so that your business is a separate entity from yourself, and that creates a layer of protection so that if any legal action was taken against your business, it wouldn't necessarily affect yourself or your personal property.
You may also consider forming an S corp. However, most people don't need to do this when they're first starting their business. If you're considering possibly forming an S corp, then I would recommend talking to your accountant or to a business attorney to find out if this would really be the best option for you. When you're first starting your company unless you're in a higher risk industry where you may be posing some sort of risk or harm to your customers, it generally is fine to start your business as a sole proprietorship either under your own name or under an assumed business name that you've registered. However, as I said, important to consult legal counsel as needed.
4. Company Description
The next section you'll see on the plan is a brief description of what your company does. Now, for some of you this might be incredibly obvious and you already know exactly what your company does, however, even if you are in that camp and you know what company you're starting and what it's going to do.
I have a few thoughts that I want to share with you here that can make this company description a stronger foundation to build your business. According to the dictionary, a business is an entity that engages in commercial behavior. In other words, it's an entity that exists to trade with others(ie sell things.)
The big question is, what exactly is your business going to be trading with your customers? Most likely they're going to be trading you their dollar bills, but what are you going to be giving them in return, you need to be providing something of value that they want to purchase your business's product could be a service, a physical product, or even simply information, but whatever it is you, the business owner, need to be clear on the true value of the product that you sell.
I'm not talking about the product itself but what the value of that product is. For example, if you're selling vacuum cleaners, you need to be aware that people aren't just buying vacuum cleaners because they want vacuum cleaners. They're buying vacuum cleaners because they want clean floors, and even more than that because they want to feel like they're living in a clean, healthy environment and perhaps because they want to impress their friends with the cleanliness of their home. So again, what exactly will your company sell and what is the real value of that product, is there a specific result that your product creates are you solving a problem for your customers, whatever that value is, you the business owner needs to be clear on that because people won't buy your product unless they are clear on how it will improve their lives and it's doubtful that they will understand that if you the business owner don't.
5. Company Misson
The next section is mission. What is your company's mission? Why does your company exist, what are you striving to accomplish? I'm sure that you have a really firm handle on some huge mission you want to accomplish or just something you're really passionate about. Most of you, look at that and think, “Oh, I should probably have a mission, shouldn't I? But I really don't know what it is.”
I think that your mission can actually be a lot simpler to create than you might think. As you develop your mission, and as you start to build your company, you will get a much more firm grasp on what your mission is, and it will evolve and develop over time.
The big problem that your company exists to solve, is there are some problems that you see people facing in the world that you want to fix for them that you want to help them overcome. Maybe it's a problem with the world as a whole that you think just shouldn't be.
Now, I know that these questions can feel really big, and maybe you don't have a plan that is as grandiose as that but go back to that product and that value that your product has you want to create that product because it will provide some sort of value to your customers, it will solve some sort of problem for them, it will create some sort of result. That is a big step forward towards what your mission is figuring out what your mission is, once you know what that value is that you are adding to your customer's lives, suddenly your business's mission becomes adding that value to as many people's lives as possible.
As you think through these questions you may find that you come up with a more clear and specific goal, and that's excellent! It's not necessarily necessary, but it's a very good thing to have a clear goal because it will make it easier to achieve and easier to rally your future team around over right now I mostly just want you to focus on thinking about, what is your business, striving to accomplish, how is it working to improve the world.
6. Chart of Accountability
The last thing that you're going to find on the first page of the business plan is the chart of accountability. This is essentially a diagram that explains who is responsible for what and who they are accountable to. At first, this chart of accountability will be extremely simple, in fact, you'll probably write your own name into each of the different spots of responsibility.
However, in order to get the best results with this, I'd recommend that you kind of take a step back, and first you think about what the different divisions of your company will be, what are the major functions that your company needs to have and do in order to be a successful business. You probably need to have a part of your business, that creates and delivers your product, you'll also need to have a division of the company that markets the product, and then you'll need to have a division that takes care of the administrative work and also manages the finances.
So first you can just start with those three different divisions of your company to cover each of your three major functions, and probably you're going to be the person who is responsible for each of those different things. As your company grows, you'll start to fill in other people's names into these spots, and having this chart will clearly outline from the very beginning to help you know exactly where your new hires fit into your company.
Right now, this chart can be really helpful for you, because it will help you to understand the different responsibilities that you need to fulfill in order to grow your company, and that can make growing your company is a much more successful adventure.
This first section of your business plan really isn't very long, it's less than one page, however, it is going to require a fair amount of thought, and I know that for that reason, you might be tempted to skip it, especially after reading this blog and seeing everything that goes into it.
Answering these questions is important, because if you don't yet know the answers to these questions, then that means that there's a bit of thought work that you need to do in order to create a strong foundation to build your business on. So, I urge you, please do not skip this step, it really doesn't have to take you that long because you don't have to have the perfect answers again, you just need to do a little bit of work on this, so that you can start to build that foundation so that your business will be strong as it grows and it will later crumble as it gets bigger and bigger.
Now, of course, your very first step to getting started with this is to go and download The Easiest Business Plan Ever. When you do so you will get all six parts of the easiest business plan, and in future weeks we will be working through those subsequent parts of the plan so that you have all of the details and guidance you need to be able to create a really solid plan for yourself.