If you’re stepping out into the world of small business ownership for the first time, things can be pretty confusing. The very idea of starting a business may sound appealing to you, but it may also seem like a costly, time-consuming task that can only be accomplished by individuals who already have loads of cash to spare.
This idea, of course, is hogwash. People just like you start successful businesses every day with little to no experience. On the other hand, even more people start businesses that fail within one year of start-up. The world of entrepreneurship is rife with failure, and in order to succeed, you must be ready to pick up the pieces if your first idea doesn’t end up going anywhere.
So let’s say you’ve thought things through for a long time and you’ve developed a pretty solid core of a business idea. You haven’t put anything down on paper yet, but you want to explore the idea a bit further. What do you do next?
The best way to start taking an idea for a business to the next level and molding it into reality is to develop a business plan. The business plan development process will allow you to identify all of the strengths, weaknesses, and logistical challenges associated with your proposed endeavor. By developing the business plan, you will begin to get a sense if your idea can stand on its own while earning a profit, or if it is liable to crumble the moment adversity rears its head.
Developing a business plan is also crucial if you have any intention of seeking outside sources of funding. For some businesses, having a clear, well-constructed business plan can be the difference between tens of thousands of dollars in investment capital.
This is the most important section of your business plan. It should appear at the beginning of your plan, but it should be the last thing you finish writing. The executive summary essentially contains a condensed outline of your business plan. After reading it, an individual should no longer have any major questions about your business. In many cases, the executive summary may be the only portion of the plan an investor reads initially. A well-written executive summary is the only thing that will convince them to continue on into the meat of the business plan.
When writing the executive summary, be concise. State your objectives very clearly, and present only key pieces of information related to the product or service you will be offering. Be sure to include short summaries of the market research you have conducted, the competitive advantage your business will offer consumers, and your financial forecast. Also, make sure to keep your executive summary under a page.
Your company description should include a brief overview of the industry you will be serving and where you will fit in among your competitors. Provide a description of the consumer needs that your company will address, and describe how you intend to accomplish this. This section should provide the reader with a sense of where your company will stand among its competitors, how it will differentiate itself, and how it will respond to any anticipated challenges it will face in the near future.
Include a discussion of how your company will expand as it succeeds. This should include hiring of additional employees, changes to management structure, expansion of product/service lines, etc. Be sure to address any major market shifts that have been projected by experts, but also include your own personal predictions about what the future may hold for your industry.
Product or Service Description
This section should include a detailed description of the product or service you will be providing, including how it will benefit consumers and what differentiates it from similar products or services that are already on the market. If it is a physical product, describe its appearance vividly but concisely. Be as detailed as possible without being too wordy.
If your company plans on starting out with only one product or service and gradually expanding, provide a description of any future products or services you have planned as well. Your future offerings are, of course, subject to change based on consumer feedback to your initial offering and changing market conditions, but by including proposed offerings in your plan you are demonstrating that you have given careful consideration to your company’s future expansion and development.
How will your business be structured? Will it be a single entity, or will it include multiple divisions or departments? How many employees do you anticipate having to begin with, and what will their roles be within the company? Your business’s organizational structure can be a reflection of the internal culture you are trying to create, and it may be used as a powerful tool to address your business’s competitive advantage.
Creating an organizational chart can be a very useful tool for illustrating your organizational structure. Visual depictions of corporate organization are often much easier for your readers to understand, especially if they are reading through your plan rather quickly.
For each position that you create, make sure to describe the position’s associated responsibilities. You may also want to include a template job posting for this position that outlines the required skills and experience. You may also want to include prospective salaries and benefits for each position.
To see if your idea holds any water, you will need to conduct extensive market research to identify other competitors you will have to contend with, target demographics for your product or service, and geographical regions of preference. The depth of research conducted can be increased by administering polls and surveys to potential customers and asking for their opinions about product and service lines you are considering developing.
Your market research should include competitor pricing analysis, as this information will help you determine pricing for your own product or service. Your pricing strategy can make or break your business, and it is an extension of your overall sales and marketing strategy. Premium product? Price higher to give consumers confidence that they are going to be receiving a product that is superior to the cheaper alternatives. Discount product? Try to remain as competitively low as possible.
Conducting extensive market research will help you shape the future development of your business. By evaluating your initial target markets in terms of age, occupations, interests, location, etc., you will begin to get an idea of how your demographic will change over the coming years, and how your company plans to adapt in response. You should also have an idea of the relative size of your target market, as this information will prove invaluable for developing realistic financial projections and sales goals.
Be sure to address any potential entry barriers that may be relevant to your industry. Entering the financial or high-tech arena with a new product or service can be challenging for a newcomer, and without the necessary clout, reputation, and capital, your plan is likely going to feel somewhat thin. On the other hand, online sales of consumer products is a fairly easy market to enter into, especially if you are offering an item that is not currently offered by large, well-established companies.
Sales & Marketing Strategy
First, this section should address how you plan to sell your product to customers, be it online or in person. Are you distributing a physical product to retailers across the country, setting up your own brick-and-mortar shop, or taking care of all of you transactions online? Describe the mechanics of how your product will eventually reach your customers, and identify any potential threats or challenges that may be encountered along the way.
Next, this section should address how you plan to reach your target demographic. You want to provide potential customers with the information they need to feel comfortable buying your product or service. This includes your company’s overall philosophy, which may be concisely expressed as a tagline or slogan. The copy that appears on your company’s website or marketing materials should expand upon this philosophy.
Include specific information regarding your business’s branding, advertising strategy, use of print marketing materials, and any other ways you plan to reach customers. Outline your proposed sales philosophy, indicating whether you will be working to maintain customers over a long period of time or working to constantly be attracting new, short-term customers.
Central to your sales and marketing strategy should be how you plan to use online marketing through social media and other platforms to your advantage. As a new company starting in 2014, you’re pretty much obliged to maintain Facebook and Twitter accounts. Other social media platforms such as LinkedIn, Instagram, and Pintrest may also be essential for your business, even in its infancy. The world of marketing is not entirely contained online, but how you manage your business’s online presence will be crucial to its success.
Include goals for the number of new customers you would like to acquire at various time intervals, such as six months, one year, two years, etc. Set concrete sales goals to shoot for as you begin to develop your business from the ground up.
This section should address the financial capital that will be necessary for your business to get off of the ground. This estimate should include an itemized summary that breaks down costs by the specific needs they address. This will make your financial needs projection more believable for potential investors. Readers of your business plan should have a clear idea how you will be using each investment dollar you receive. In addition to startup capital, you should also include a description of any future projected financial needs.
When writing this section, keep your potential investors in mind. Try to imagine the questions they would have regarding your business and how any money they invest will be spent. Give special consideration to any criticisms, skepticisms, or genuine questions regarding your business’s viability.
Based on your anticipated revenue and expenses, your sales goals, your initial financial needs, and your plan for expansion, you should be able to present a clear picture of your company’s hypothetical financial future. Your projections should be both optimistic and realistic, and they should communicate to potential investors how quickly you plan to recover the cost of startup.
Make sure to include hard numbers, including projected revenue and profit and percentage growth. Using visual aids such as charts and graphs can also strengthen this section and make your financial predictions a bit easier for readers to understand.
If you have any additional information that you feel may be useful for potential investors, place it in an appendix at the end of your business plan. This may include photographs of your product, samples of any informational content you are planning on offering, and sample marketing material. Don’t stuff the appendix full of extraneous information that potential investors may not understand or care about. Instead, include information that will prove to your business plan’s readers that you have taken whatever steps are possible at this stage to turn your idea into a concrete reality.
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