Even experienced wellness managers make these ten common mistakes in creating and developing their business plan. Watch out for “to versus through”, invisible businesses, plus other missteps.
How to torpedo your business plan:
1. Expecting day-to-day operations to fund a big expansion
We routinely talk with wellness businesses who have built successful smaller businesses and want advice about how to get to the next level. One of the first questions to ask yourself about expansion is how you’re going to make the necessary investments — things like new facilities and additional staff that have to be in place before new revenues (and customers) appear.
If your answer is that the routine operations of your normal business will fund these investments, check your math. In our experience, you may be able to self-fund some of those costs from your current business. But you’ll probably need to find investors and consider borrowing money as well. If you get this wrong, you’ll starve your expansion of the cash it needs to grow.
2. Assuming that you can cookie-cutter your next location
Watch for these two stumbles:
Severely underestimating the sales and marketing costs of a new location.
The cost and difficulty of acquiring new customers at a well-established location is generally much lower than the cost to acquire customers at a new location. Keep in mind that free advertising like word of mouth is less and less relevant as you move farther away from your “home base.”
Thinking that your expansion will simply be a carbon copy of the existing business.
While the specifics vary from business to business, you can be certain that what works for a single location will have to be different as you add new locations. The labor pool may affect how you staff your business (and what it costs you). Tax and local legal considerations may require changes to your historical model. And your sales and marketing tactics may require adaptation for the local market.
3. Failing to explicitly decide on a single business model
We’re the first to say that what you plan for usually differs wildly from what actually happens. Nonetheless, you need to pick a specific business model and stick with it until you find a compelling reason to change.
Think of your “business model” as the handful of critical success factors that make your business actually work.
For example, McDonald’s business model relies on providing highly structured training to cheap labor and automating the work that this relatively untrained labor force actually performs whenever possible. They’ve had to get really good at churning out new restaurants as efficiently as possible. And their products are consciously designed to provide options for the whole family — a big burger for Dad and the teenage son, salad for Mom, and a smaller meal + toy for the little one. On the other hand, they’re not known for menu innovation or incredibly good customer service — those elements simply aren’t part of their business model, and they don’t need to be.
We spoke last year with folks interested in investing in a healthcare-related business. They were planning to simultaneously acquire and convert existing businesses, build new locations from scratch, and pursue a franchise model. You could probably make any of those business models work — as long as you pick one and direct all of your plans and resources towards that goal.
The reason you need to pick is because you’ll need to take different actions depending on your business model. You’ll need one set of operational capabilities if you plan to acquire and convert existing businesses. You’ll need a completely different set of capabilities if you’re going to buy land and build from scratch. You can’t afford to build BOTH sets of capabilities, just in case! And even if you could afford it, it’s unlikely that you’d do it well.
If a great opportunity actually comes along, you can always check it out. Until then, pick one business model and stick to your knitting.
4. It’s big, it’s really big!
Yeah, we know about the millions of obese kids and adults, the millions of people with type 2, millions of aging boomers, etc., etc. None of that really matters when it comes to making your specific business successful.
Your business plan needs to zero in on how enough people from your target market segment — in your specific community, at your specific location — will find your specific business.
Forget about theoretical competition and abstract market segments. That stuff just doesn’t matter for most startups in health and wellness. Instead, identify specific likely competitors in your community. What actions will differentiate your business? How will prospective customers even know you exist? And why exactly will they choose you, and not a competitor?
Lay out your sales and marketing ideas on a timeline — along with their cost AND projected results: how many customers, how much revenue. This exercise will help you evaluate whether your planned sales activities really make sense when you look at their likely outcomes.
5. Naïve understanding of how employers and insurers think
Someone told us recently that insurers would provide reimbursement for their wellness programs because “they’ll save money if they get people healthy.” They didn’t seem to realize that navigating managed care is considerably more complicated than that.
We’ve also seen wellness professionals who focused their sales pitch to employers on the societal price of obesity and diseases of inactivity and stress. Right or wrong, that’s not what employers care about. They want to know how wellness programs will reduce their healthcare costs and improve workforce productivity. Lectures about the sad state of health in the U.S. don’t belong in your sales pitch.
6. Confused about selling TO versus selling THROUGH
Life is relatively straightforward when you sell directly to consumers. It’s more complex when you sell THROUGH someone else.
For example, you may have to build physician relationships if your business depends on physician referrals. For instance, some states require a physician referral to registered dietitians and physical therapists. If you provide dietetic or PT services, you’ll have to plan for building and maintaining those MD relationships. Similarly, you’ll need a plan for building and maintaining employer relationships if you want to provide wellness services for employees.
In addition, you’ll need all the processes and capabilities necessary to support your actual customers and end-users. Yet the way you build and maintain customer relationships is quite different from the way you’ll build and maintain relationships with employers or physicians.
7. Thinking your current team can easily step up
Rapid expansion over several years takes more than a couple of go-to people. You’ll need a team of people who love to operate independently, yet play well with others – and are totally bought into your vision for the business.
If you’ve been in a “business as usual” mode for several years — and now you want to change gears – get ready for team changes. People who love to grow a business are often not people who enjoy a more predictable “same as yesterday” routine, and vice-versa.
8. No plan for getting repeat business
This issue faces many wellness businesses focused on programs to help clients reach specific health and wellness goals.
If you’re going to sell $500 worth of healthy living programs to a customer — and three months later they “graduate”, never to be heard from again — your sales costs will probably be unsustainably high as a percentage of your revenue.
It’s extremely important that you have a plan for continuing to sell appropriate products and services to those happy customers. And you also need to develop strategies for encouraging them to spread the good word about your business and send your referrals.
9. Invisible business
Wellness startups often assume glowingly optimistic Year 1 sales and profits. Yet nonexistent customers are a brutal fact of life for many wellness businesses. First-time businesses often expect instant customer interest. In truth, their businesses are invisible to potential customers.
When you plan your Year 1 revenues, run a worst-case scenario where you lose money due to insufficient revenues for six months to a year. Can your business survive that?
Minimize this ramp-up period with a smart marketing plan that starts well before you open your doors. Avoid expensive marketing events that often fail to produce actual customers. For example, a big grand opening party may attract lots of “looky-lous” who scarf up your giveaways and enjoy the free entertainment. Unfortunately, they probably won’t generate a single referral.
On the other hand, cooperative marketing efforts with businesses who also serve the kinds of customers you’d like can be very effective.
10. Not knowing what you don’t know
What gaps in expertise does your business have? As you put together your plan — whether it’s for a new business or an existing one — step back and think hard about the capabilities your team has and the ones you need.
For example, many wellness businesses really struggle because they don’t have access to people with appropriate technical skills who can develop and maintain a website, install and support a computer network, or appropriately configure more complex software applications. You may not have anyone who’s really got strong financial skills.
Maybe your HR team hasn’t supported a larger organization spread out over multiple states. Or maybe you’ve never actually created a business plan specifically targeted towards private investors.
You can buy this expertise by the hour if you don’t need full-time help. Consultants and independent contractors are both good ways to get expertise and experience at much less than the cost of a full-time employee. You may even be able to barter for some of these services.
What’s important is that you get the capabilities your business needs to thrive.