Lean Business Plan: A Simplified Approach to Drive Sucess in 2024
There are two distinct approaches taken by entrepreneurs when starting a business: those who meticulously plan every aspect and those who dive in headfirst without a formal business plan.
While both approaches have the potential for success, embarking on a business venture with a well-thought-out plan not only allows you to envision the journey ahead but also provides the guidance needed to stay focused and committed to your goals.
As we enter the year 2024, entrepreneurs and business owners are seeking innovative approaches to drive growth and achieve goals. And one such approach that has gained significant traction is lean business plan.
I. What is a lean business plan
A lean business plan is a shortened version of your full comprehensive business plan. It is useful for when you need to modify your plan for a specific audience. Typically the lean business plan is for internal use. For example, if you want to share your business plan as part of the onboarding process for new hires, you may use a lean business plan to avoid overwhelming them with too much information.
Lean business plan allows business to develop the core aspects if your business strategy on one page. It uses customer needs and problems as the foundation of your success, and it focuses on your value proposition to differentiate you from your competitors.
II. Traditional business plan vs lean business plan
When comparing traditional business plans and lean business plans, there are some key differences to consider.
Length:
- Traditional business plan: Lengthy document, around 30–40 pages
- Lean business plan: Short, often just one page
Content:
- Traditional business plan: Outlines every detail of the business. In-depth analyses of the industry, market, and financial projections
- Lean business plan: Focuses on the essential elements. Include a lean canvas
Suitable for:
- Traditional business plan: Later on, to secure funding and scale the business
- Lean business plan: Validate idea and find product-market fit
Pros and cons of traditional business plan:
- Pros: Comprehensive view of the business, detailed financial projections, and in-depth market analysis
- Cons: Time-consuming
Pros and cons of lean business plan:
- Pros: Be quickly adjusted as the business evolves. Useful for startups and businesses that prioritize agility and adaptability
- Cons: Faster time to market
III. Components in a lean business plan
1. Business model: How your business will make money
This section outlines the core revenue streams and the overall strategy for generating income in your business. It should clearly define:
- Products or services you offer
- Your target market, pricing strategy
- Unique value propositions that set your business apart from competitors
- Details on your distribution channels, sales approach, and potential partnerships
2. Schedule: What each person in your business will do, and when
In this section, you’ll outline:
- Roles and responsibilities of each team member or department
- Clear expectations for tasks, deadlines, and accountability
- Timeline or Gantt chart to visualize key milestones, deadlines, and dependencies,
Schedule helps everyone understand their role in achieving business objectives.
3. Strategy: What your business will do
The strategy section articulates the overarching goals and objectives of your business and outlines the broad approach you’ll take to achieve them. This may include:
- Market analysis
- Competitive positioning
- Target audience identification
- Long-term goals
Your strategy should align with your business model and address factors such as growth opportunities, market trends, and potential challenges. It serves as a roadmap for decision-making and resource allocation.
4. Tactics: How your business will implement your strategy
This section dives into the specific actions and initiatives your business will undertake to execute your strategy and achieve your goals. It outlines practical steps, campaigns, projects, or programs you’ll implement to reach your target market, build brand awareness, drive sales, and achieve other strategic objectives. Tactics may include:
- Marketing campaigns
- Product development initiatives
- Operational improvements
- Customer acquisition strategies
Each tactic should be measurable, actionable, realistic, and time-bound (SMART), with defined metrics to track progress and success.
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IV. 6 steps to create a lean business plan
1. Create a strategy
Start with asking yourself these questions:
- Who are you
- What do you do
- From whom you do it
You should write them down. Remember that:
- Planning outside the strategy is waste of time
- Choose your fitting framework. One example is:
- The problem you solve
- How your solution solve it
- Who you are
- The market you try to reach
And, don’t overly stress about any specific strategic framework. Remember, strategy is all about focus. It’s not only about what you’re doing and who you’re reaching, but also about what you’re intentionally not doing and who you’re deliberately not reaching
2. Develop your tactics
When developing your tactics, keep your strategy at the forefront of your mind. Consider what actions you should take and what actions you should avoid, and always keep in mind your target audience. Develop specific plans that are aligned with your strategy and emphasize the importance of execution.
- Marketing tactics
- Target audience
- Positioning
- Distribution channels
- Pricing
- Online presence
- Content
- Marketing mix: advertising, public relations, promotion,…
- Offering tactics:
- Launch dates
- Feature sets
- Packaging
- Product lines and options
- Apps
- Menu items
- Stock keeping units
- Services
- Website
- Tech stack
- Vendors
- Delivery options
- Financial (and infrastructure) tactics:
- Funding and financing
- Policy
- Hiring and recruiting
- Training
It’s important to note that these plans should not be treated as rigid documents. In the early stages, focus on functionality rather than elaborate formatting. You can use bullet points or organize your thoughts into sections, but remember that these plans are interconnected and should not be viewed as independent entities.
Strategic alignment is crucial. Your tactics should be a direct result of your strategy. This means carefully considering all the relevant factors and documenting your plans in a simple and concise manner.
Keep in mind that these plans should be revisited regularly, perhaps on a monthly basis, to assess your progress. Think of it as a personal business plan, covering aspects such as pricing and distribution, tailored to your own needs. Keep the scope of these plans manageable, ensuring they are just big enough to effectively run your business.
3. Schedule
Once you have developed your tactics, the next step is to establish a well-organized schedule. In lean business planning, efficiency is a key focus, making the design of a structured schedule essential.
For startups:
If you are in the process of launching a new business, start by understanding your target customers. To build a successful and sustainable business, you need to have a deep understanding of your customers’ perspectives, desires, and needs. The objective here is to develop a strategic and organized approach. A startup’s schedule often includes activities such as conducting surveys, interviewing customers, and researching potential locations.
For established businesses:
For businesses that have already been established, the schedule should be centered around achieving the identified business goals. Your schedule should outline specific actions with assigned names, dates, and even times. By creating a detailed schedule, you can hold your business and its employees accountable for their work and monitor progress effectively.
Remember to allocate regular time for reviewing your lean business plan. As your business evolves, so will your lean business plan. Establishing a consistent review schedule is critical to keep your business on the right track and ensure that all team members are aligned with the plan’s objectives.
4. Forecast
It is essential to forecast your key business numbers as it allows you to track your progress, identify issues, and take advantage of unexpected opportunities.
When it comes to forecasting, don’t stress too much about precision; just get it done.
If you can run a business, you can create a basic forecast for sales and costs. The goal is not to be 100% accurate, but rather to establish realistic assumptions. It’s natural to make mistakes, but with sound assumptions, you can analyze how and where you went wrong and make necessary adjustments on a regular basis.
In addition, careful consideration of cash flow is vital in business planning. While for some straightforward businesses, cash flow is primarily about staying profitable by ensuring sales exceed costs and expenses, for most businesses, it is more complex. This is because payment for sales may not align exactly with the timing of the transaction, and there may be upfront expenses involved.
Being profitable does not automatically guarantee having sufficient funds in the bank. Proper cash flow management is crucial to ensure the business remains financially stable.
5. Execution
To ensure that your tactics are effective, remember to incorporate dates, deadlines, and specific task assignments. Here are the essential elements to include:
Review schedule: Scheduling regular reviews is absolutely essential. In the busy real world, if you don’t proactively schedule and commit to a monthly review, it is unlikely to happen. Choose a specific date that works for you, such as the third Thursday of each month, and stick to it.
List of assumptions: Always include a list of assumptions in your plan. This serves as a reference point when it’s time to make revisions. As you track the results and compare them to the plan (which will inevitably differ), the first step is to examine the assumptions. If any of the assumptions have changed, revise the plan accordingly. If the assumptions remain the same, you can then evaluate if the execution was carried out correctly.
Milestones: Create a simple yet comprehensive list of milestones that outlines:
- What should happen
- When it should happen
- Who is responsible for each task
This list is the core of execution and can be tailored to meet your specific needs. It can serve as reminders for yourself or as commitments from the team, complete with budgets, start dates, end dates, and other relevant details.
Metrics: Metrics are performance indicators that complement milestones and promote management accountability. While sales, costs, and expenses are typically the most important metrics, consider including other relevant metrics specific to your business. These could include:
- Web traffic
- Conversions
- Foot traffic
- Sales per square foot
- Sales per employee
- Social media engagement (such as tweets, followers, likes, retweets)
- Customer interactions
Tailor these metrics to align with your business objectives and track them regularly.
6. 3R: Run, review, revise
The concept of lean startup and lean manufacturing originated about 70 years ago with the idea of PDCA: plan-do-check-adjust. Initially known as lean manufacturing or “the Toyota way,” it has since been embraced by experts and authors like Eric Ries and Steve Blank in their work on The Lean Startup.
This approach involves a continuous improvement process consisting of planning, taking action, evaluating results, and revising the plan. The term “lean” and the idea of a continuous process are applicable to business planning. While many people associate a business plan with a formal document, effective planning is actually a streamlined and simple process that can be summarized as PRRR: plan-run-review-revise.
V. Lean business plan template
1. Executive summary
Executive summary of your lean business plan should include bullet points that highlight what will be covered in the rest of the document. Its purpose is to capture the attention of your readers and generate their interest in the information that follows. Take the opportunity to call out exciting or surprising bits of information to pique their curiosity.
Action:
- List the key points of your company, including its name, business model, product/service, and unique selling proposition (USP).
- Identify the target market and financial highlights.
- Use bullet points to organize these details in a concise manner.
- Write a draft of your executive summary, ensuring that it is compelling and brief.
2. Company description
Company description section provides a clear and concise overview of your business. It explains what you sell, your business model, and the type of business you have.
Action:
- Summarize what your company does in two sentences.
- Define your business structure and mention the founder’s background.
- Write down your short-term and long-term business objectives.
- Create a bulleted list incorporating these points.
3. Market analysis
Market analysis section aims to showcase the research you have conducted to validate your business idea. It is important to demonstrate that there is a substantial audience willing to spend money on a business like yours.
Additionally, your market analysis section in the lean business plan may include a SWOT analysis, which assesses your strengths, weaknesses, opportunities, and threats. You can also provide a summary of your competitive analysis, listing your competitors along with their strengths and weaknesses.
Action:
- Gather research data on your industry and target market.
- Perform a SWOT analysis for your business.
- Identify key competitors and note their strengths and weaknesses.
- Bullet point your findings for inclusion in the lean plan.
4. Products and services
In this section of your lean business plan, you will outline the specific products or services that you plan to offer to your customers.
Action:
- List all the products or services that your company offers.
- Describe the customer experience from start to finish.
- Keep the descriptions clear and concise.
5. Customer segmentation
Customer segmentation section of your lean business plan involves grouping your target audience based on shared characteristics. This segmentation is beneficial because it allows you to define specific audiences and create targeted promotions and messaging that directly appeal to those groups.
Action:
- Define your primary and secondary (if have) customer segmentation
- List the characteristics that define this segment: age, gender, location, behavior, …
6. Marketing plan
Marketing plan in your lean business plan should outline your pricing strategy, promotional channels, and sales venues.
Action:
- Detail your pricing model and provide justification based on your market analysis.
- List your main marketing and promotional strategies.
- Define where and how customers can purchase your products or services.
7. Logistic and operations plan
This section of your lean business plan will cover the day-to-day operations, including suppliers, production, and shipping.
Action:
- List your suppliers and clearly define their role in your business.
- Detail the production process step by step, including any necessary equipment or resources.
- Explain your shipping and fulfillment strategy, including how orders will be processed and delivered to customers.
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A detailed lean business plan template
1. Overview
2. Market opportunity
- Market problems and challenges
- Our solution
3. Target market
- Target audience: demographic: gender, age, location, income,…
- Our channels
- We reach our customers through: email, market stalls, paid advertising, phone, social media, website, other,…
- Customers can contact us through: email, phone, social media, website, other,…
4. Our competition
- Competitor name
- What they do well
- What we do different
- Competitor example
5. Our finances for the year ahead
- Forecast expenses and profit
- Expected sources of revenue
- Expected expenses
6. Key people
- Name
- Position
- Skills/ value
7. Our next steps
- Goal
- Actions to achieve goal
- Deadline
VI. Final thoughts
If you are a business preparing for a business plan event, your lean business plan is still the most essential component. You just need to include an executive summary and, if necessary, market information, a pitch deck, or any other required elements.
It’s important to remember that form should align with function. Therefore, having a plan is crucial regardless of your company’s size or age. However, not everyone needs to have a comprehensive formal business plan with all the supporting details.
