Almost every business needs a business plan in order to succeed but most people don’t know where to start and that can be daunting. Some entrepreneurs just decide to skip this part altogether but a recent Panal Study of Entrepreneurial Dynamics concluded that just by creating a business plan, you’re 2.5 times more likely to go into business. If you need to secure funding outside of friends and family you’re almost always required to have a formal plan.
Most business plans are comprised of an executive summary, a marketing plan, a management team description and financials over the course of the next five years. Before you can write any of that, you need to come up with meaningful goals for your business which is where the SMART mnemonic comes in to define them.
SMART according to Mind Tools stands for:
S – Specific (or Significant)
M – Measurable (or Meaningful)
A – Attainable (or Action-Oriented)
R – Relevant (or Rewarding)
T – Timely (or Trackable)
Business plans need to be detailed and the best way to create goals that are specific are to ask the five W’s.
Who will be involved in the process?
What will you achieve?
When will you achieve it?
Where will you achieve it?
Why are you doing it?
Most of these questions will lead to other who, what, when, where, and why questions and the further you go into these chains, the more detailed your plan will be.
You’ll need to know how you are going to track your progress outside of income and money. If your business will be using a lot of online advertisement, for example, you’ll have to understand Cost Per Clicks and know how to measure it or how many units of your product you will need to move in order to be profitable. If your business model includes employees, how can you measure their productivity. The more you can measure, the better off your business will be.
Having specific goals you know how to measure doesn’t mean they’re attainable. Dreaming big is wonderful and it’s great to hope for the best, but also keep your goals within the realm of possibility. Should your business outperform expectations, that’s great and you can accelerate the growth of your business but you should be aware that odds are against that happening.
Every action you take for your business requires energy or resources so make sure it’s relevant. Each goal should be a stepping stone to increasing your business and open new doors that, in turn, nurture it even more. Spending time on something that will only affect your business minimally is a waste and better spent on something more relevant to growing your venture— so prioritize accordingly.
Most business plans are five-year plans so your goals should be attainable within this time frame rather than spending time detailing goals that may not come to fruition for another decade. It’s good to have a vague notion of where you want the venture to go in the far future but it’s not as important as your goals for next year. There should also be targeted goals throughout the five year period that are (again) measurable. This also creates deadlines for you and places pressure to strive towards these goals.
I realize this isn’t part of the mnemonic but it’s important to note: never forget that plans are not set in stone and subject to change so if something isn’t going according to your plan then change your plan to accommodate it. Remember the age old advice, “no battle plan ever survives contact with the enemy.”