Are you ready to start a business? Congratulations! You’ve made it through the first step, becoming an entrepreneur.
That being said, many questions are running through your head. One of the most common questions is about creating a business plan.
Do you need it? Of course, you do! A business plan is more than just a document that describes your company’s mission, goals, and objectives. It’s also a strategic plan that helps you achieve those goals.
However, when creating your business plan, you have two options: the Lean Startup or the traditional approach.
So, which plan should you use? Traditional or Lean Startup? This guide will help you choose the right plan for your business.
The Traditional Approach
The traditional approach to business planning is what most people think of when they hear the word “business plan.”
This approach is based on the idea that you need a detailed plan to launch your business and that once you have this plan in place, you can start financing your company.
The traditional approach requires you to spend time researching and writing about every aspect of your company before you get started.
You’ll begin by identifying the market opportunity for your product or service (the target customer), then create a detailed description of how you will meet their needs (your value proposition).
You’ll also need to identify who will pay for this value proposition — customers — and how much they’re willing to pay for it.
Once you’ve got all these details worked out, you’ll decide how much money it will take to launch your business and how much money you can make selling what you’re selling.
Then it’s time for the fun part — writing up a detailed plan!
Writing a Traditional Business Plan
The traditional approach to writing a business plan begins with an Executive Summary that describes the problem and solution, followed by the Company Description, which explains what makes your company unique and why investors should invest in it.
The following section is Market Analysis, which includes a description of your target market(s), your competitors, and how you plan to serve your customers better than other companies in the industry.
Then you present your Business Strategy, which includes information about how you will make money (the Profit Model) and what assets are needed to make it happen (the Financial Projections).
Next comes Personnel Plan, which covers recruitment, training, and development; then Operations Plan, which covers marketing and sales plans; then the Risk Analysis; then Financial Plan; and finally, Legal/Tax Considerations.
Why Is This Approach Popular?
It makes sense that many entrepreneurs start with this approach because it’s what they’ve been told they need to create a new business venture.
They may also be looking for funding from investors or lenders who insist on reviewing the business plan before they make any decisions.
The Lean Startup Approach
The Lean Startup Methodology is a framework for building, measuring, and learning — all at the same time.
It’s based on the premise that startups should be built around learning what customers want and need rather than wasting time building products that don’t work.
With this in mind, a Lean Startup Business Plan will focus less on product development and more on your company’s customer development processes.
You won’t be writing about how you intend to launch your product or service — instead, you’ll focus on how exactly you plan to test it.
Key Elements of A Lean Startup Business Plan
A Lean Startup Business Plan has the following key elements:
What problem does your startup solve?
How will you solve the problem? What is the solution that you are offering?
Unique Value Proposition
How will you deliver value to customers? What makes your solution unique?
Customer Segment and Channels
Who are your customers? Who will buy your product or service? Where will customers avail of your solutions?
How will you get money? Where will you get it?
Which approach should you use?
In the end, trying is the only way to find which approach works best for you.
Fortunately, both lean and traditional business plans have strengths and weaknesses easily discerned by using both methods.
So if you’re stuck between traditional or lean startup methodologies, start with the lean startup business approach, and then try writing the traditional one. If it’s not for you, don’t force yourself to use it (you won’t get very far).
But if it does work for you, then there’s no reason you should stop—your newfound love of planning will pay off in the long run.