What kind of competition do you have for your donut business? How does your business and your product measure up to theirs? Evaluate what your competition does so you can copy what works for them and discard what does not. In other words, learn from those who are trying to get your customers. How do competitors define the product (donuts) in your area? How much market share does each have?

In the competitive analysis of your business plan you will want to look at donut businesses similar to yours including national chains that also operate storefront businesses. If you operate a trailer and move between fairs and festivals your competition is not necessarily other donut businesses (although those count too) but those next to you selling other vending items. Granted, it will be difficult to research these other businesses on wheels before hand. When you get to a fair and set up observe everything the other vendors do that attracts customers and everything they do that has no effect.

Also consider how likely other competitors may enter the market at a later date. Investors will want you to research how saturated the market is and what the barriers are to people who want to make donuts like you do. Do not let your emotion get in the way of your analysis. It is easy to assume that your product will be superior to everybody else’s, but there is much more to consider. Taste, size, price, and service are all important things to look at but are only part of the picture. Try to learn the internal business practices behind the scenes to gage the strength of your competition. Are they creative, motivated, and financially secure? Do they have high employee turnover? These are keys to success as well.

Investors do not want to know why you are a little bit better than the competition. They want to know why you are way better then the competition. Try to view your donut business through the eyes of a customer and if possible be a customer of other donut businesses to gather your information.

Did you know having your business plan fail can be the best thing that can happen to you? Sounds crazy right? But it’s true, and here is why.

Why Plans Fail

Business plans, marketing plans, heck any kind of plan is going to fail. Some just a little and others spectacularly. It’s not for lack of work or analysis. It’s because we can’t predict the unpredictable, and when we try we aren’t very accurate. Customers and markets are fickle. Something unexpected occurs. Or we just screw up and it all wrong.

I’m sure New Coke looked great on paper. Anybody remember the Apple Lisa or the Cube?

Plan to Fail?

So if plans are going to fail, why bother with them at all? But a better approach is to don’t sweat getting your plan right the first time out since chances are it is going to fail anyway. Its more important to understand this and think about your plan B. And remember, this isn’t just for business plan, it is for any kind of plan.

Plans are worthless, but planning is everything for success

Since we know change is going to happen and things are going go wrong, why are we got off guard all the time when they do?

The most successful people recognize this happens and are prepared to adjust. And not adjust by blindly taking another, different stab and things. They have planned ahead. They look to the market and find what is working with their plan. They run with the things they got right, They see what isn’t working and adjust.

Getting to Plan B

I started to think about this after I read an interview with John Mullins who wrote a book called Getting to Plan B. In it Mullins lays out some approaches you can use to see if and how your plan is failing and how to fix it.

Make no mistake. Unfortunately this isn’t a license to be lazy and count on working it all out later. Quite the opposite. You have to do more work, but it is smarter work that gets you through failures and has its rewards in the end.

They look at what others who have succeeded did or didn’t do. Same for those who failed. They find the lessons from failures. When they do that they are able to make better decisions. Then they just do it all over again until they get it right.

The lesson is that they are always planning. It’s like the idea of the one page business plan. You still have to put in all the prep time on it. No shortcuts. But the what makes this work is that you regularly review and update your plan. You don’t just toss it aside when you are done or scrap it if you hit some problem. Fix what isn’t working. Adjust to changes and any new or missed opportunities.

This really works

This is how software gets developed only they call it the iterative approach. You don’t write a program all at once. You work through it in cycles, getting more done each time. You fix the broken parts and add new features until you are all done. Then you sell it. Unless of course you’re Microsoft. MS sells and lets us find the broken parts, but that’s a different story.

I worked with a microbusiness that wanted to do consulting on importing/exporting industrial equipment. We found there wasn’t a market for their consulting services, but we did find out there was a big need for technical translation services. Okay, we rethought the business model and changed. I worked with another small company that did custom software development. They only wanted to do work on big projects, but they found out that they were making much more money doing body shop work–putting individuals into specific contracts as consultants instead of taking on big projects as a team. Time to change directions.

One of my favorite types of projects is working on small business plans with clients. There is an air of excitement as they work out their ideas and put their dreams on paper. I always think that I might be witnessing a birth of another future corporate giant. Some of those ideas are compelling, others seem unattainable, and yet the confidence and certainty my clients exhibit leave me with no doubt that they will succeed.

The Challenge of Writing a Business Plan
As excited as these entrepreneurs are about their ideas, for many of them the actual task of writing things down in a business plan format is very hard. They would rather get started already, develop their product or service, find a location – do all the things a typical small business owner does. They have such inner clarity about every single detail and yet communicating all of it in writing – in a business plan format – seems completely against their nature. It feels too structured, almost unnecessary.

Obtaining Financing
And yet, especially it today’s world, it is necessary. Most of the time the purpose for a small business plan is to obtain financing. No matter which group you are thinking of approaching – venture capitalists, commercial lenders, potential investors – they will all want to see a formal, written business plan.

Even though many people use business plans primarily, and sometimes only, as financing tools, they tend to write them in a way that puts the venture in too optimistic a light. Even if it gets you the cash you wanted, it will not help you succeed, because if the business has not been well thought out, or if the risks are too great, it will fail.

A realistic and objective business plan that also conveys your excitement about your business idea and your confidence in reaching your goals will have a much better chance of not only getting you the financing you need, but also fulfilling the other purpose it was meant to serve:

Planning a Business
Yes, that’s it! A business plan is a “planning tool”. That is its primary function and purpose. And it does this so well that shrewd business people like investors and bankers use it to determine who will get financed by them and who will not.

And you too will benefit from using it the most when you see it as such and not only as a sales tool.

It is a structured approach to refining your ideas about your business and devising a plan of action taking into account all aspects of the future enterprise: marketing, personnel, operations and finance. It helps you translate your ideas into actionable goals and it helps to predict your financial resource needs and financial results.

As you fine tune it, you will find out that it allows you to make many mistakes “on paper” and saves you from their consequences in the real world.

Monitoring a Business
The hardest business plan to draft is your very first one. Why? Because all you have are estimates and assumptions. But after a few months of operations, you will have some real numbers and you can update your plan at that point. Planning process has to be dynamic and on-going. A plan is not something you do once and put on a shelf. If it is to you, you have not realized the tremendous value it has for your business.

It should be an integral part of your management. Use it to compare your actual results to what you were anticipating. Analyze the deviations and understand them. Perhaps what you did was better than what you planned, perhaps not. Either way, you can learn from this comparison and refine your planning and your operations even further.

Any time you plan to introduce a new product, enter a new market, change the management structure, you should first prepare a business plan for the scenario you are envisioning. And don’t think this means too much time involvement for you. After all, you are just a small business owner. You cannot behave like a large corporation with a separate planing department, right? Wrong…

Large companies have large planning departments because they have learned the value and necessity of planning, but you need it just as much, if not more, because as a small business owner you do not have the reserves that can carry you through a sales slump or a bad business mistake.

This is what I always tell my clients – small businesses need all the sophistication of large companies. They actually need it even more, they just need it scaled down and adjusted to their size.