From the moment you decide to start a business, there will be so many things that run through your mind. Where to start? How much will it cost? How do I market for it?
For many, they just jump out there with no plan at all and then find themselves overwhelmed with unforeseen (and sometimes costly) expenses or no revenue generation. They’re then stuck asking themselves why. The reason why is simple…they lacked proper planning.
By proper planning, I am speaking specifically to a strategically, formulated document called a business plan.
A business plan details current and future goals and strategies for your business; as well as, provides financial plans to address three or more years of your small business. It also details how you plan to reach business goals (paying close attention to the strengths, weaknesses, opportunities, and threats – also known as a SWOT analysis).
Now that I have expressed the importance of a business plan, let’s cover how to make one. First, let’s address that there is an overwhelming amount of information on the internet and in books with information on how to create a business plan. And let’s be honest, all of that is extremely overwhelming. Do you know why? Again, the answer is simple…your business is your business. So let’s start there.
What makes your business idea unique?
This is the first question you should ask yourself. After you ask yourself that question, do market research to find out just how unique your ideal business compares to other businesses that currently exist (essentially, these existing businesses could become your competition). But do not just stop there. Also, look at their ratings and reviews (if they have any). This is one of the most effective way to find your niche that will separate their brand(s) from yours. It will also give you insight on and indirect feedback for your business and the service(s) or product(s) you plan to provide your clients or customers.
What is your business description?
Describing your business should initially be concise so it can be given as an “elevator pitch”. Why? Because this will help define the mission and vision of your company. This will also help when networking and/or “pitching” your business idea to potential investors as you develop your plan (which takes weeks, months, and sometimes years). Once you’re able to describe your business, it will make it much easier to develop your product or service descriptions, business goals (milestones), operation plan, and decide the structure of your business. This takes us to the next element.
What business structure should I use?
Determining the legal structure is very important in regards to how you will operate as a small business, so do not take this lightly. In the US, you’ll be considering whether your business should be structured as LLC, Corporation, C or S-Corp.
If you’re creating any of these structures with a partner, it’s crucial to understand how entering a partnership will affect the future of your shared business. For example, if you or your partner would like to dissolve your half of the partnership, it is a requirement to re-apply for a new Employer Identification Number (EIN) in the US once the partnership is dissolved. This applies even if one of you would like to continue to run the business as a sole proprietor. It also costs money to reapply for a new EIN.
Conduct a market overview
Knowing your target market will be the key to generating revenue in your company. It will also become a huge asset when it comes to marketing your business and marketing your brand(s) – also known as the marketing strategy. As you conduct your market research, be willing to expand or narrow your targets (age, sex, ethnicity, customer or client income, education, type of employment, etc.) to ensure you are are able to capture both direct and indirect consumers. Believe it or not, you will be amazed at how an unexpected small sample can provide consistent revenue.
Determine personal resources
When creating a small business, decide if you want to have employees, hire independent contractors, or work solo (I can assure you this is not easy). Decide the management or executive structure of your business (CEO, President, Chief Operating Officer, etc – even if for future years). If hiring employees, be mindful of your state and/or federal employee benefits responsibilities and any quarterly reporting requirements. Determine position titles, duties, and the salary or wage of each position to be filled (including yours).
Make a financial plan
Creating a financial plan is the most complex element of a business plan to develop. There are so many factors to consider and to help with that, you will need to determine the following:
- What product(s) will be sold or service(s) provided to clients or consumers?
- At what rate would you be offering your products/services and for how much
- What equipment expenses would be incurred at the start of the operation?
- What are the costs of the monthly expenses you expect to incur?
You’ll need to determine your business financial needs and profitability of your product(s) or service(s). Then your financial plan should outline start-up costs, general financial assumptions, profit & loss, cash flow, balance sheets, breakeven analysis, as well as, an overall financial view.
Most business plans should have a monthly and annual view of each of these financial components. YES, it is a lot! However, this is pertinent information for two reasons:
- Are you looking for an investor? If yes, know how much are you asking?
- Are you seeking a loan? If so, what is the repayment interest rate?
These should also become a part of your financial plan as well. This will show potential investors or banks how you will spend the money given and provide repayment cycles of a loan.
Writing the plan
Having provided you with lots of detailed information on how to make a business plan, it becomes quite a task to actually write one. For this reason, many small businesses either operate without one or with an incomplete one. If you are seeking a loan, investor(s), or a small business grant, you will need a completed and thorough business plan. When all else fails, invest in a good business plan writer that will treat your business as individual and unique as you are. Let’s face it, we are not all natural-born, talented, or gifted writers. Realizing your strengths and weaknesses when developing your business plan will make you that much stronger of a business owner. Never be afraid to ask for help. As they say ” the more you know, the more you grow”.