Planning Your Business
A written business plan is important whether you are considering launching a new venture or are carrying on a well-established enterprise. A business plan will help you define your goals, as it simultaneously gives you a guide to follow. You’ll be able to check your progress and make periodic adjustments in a changing marketplace. Banks require a business plan if financing is sought. While the plan is important, it’s the process that is essential. In other words, there is no substitution for organizing your thoughts and committing them to paper.
Steps to creating a business plan:
- Write a detailed description of the business and your goals for it. Be specific about what kind of venture you’re entering into, any special niches you will fill, and any other details that reflect value to customers. You should indicate the reason that the business exists, the customers served, and the product offered. What problem will your product or service solve?
- Review the ownership and legal or tax status of the venture. Consult with your attorney and/or accountant to determine the best legal status for you.
- List the skills and experience required to operate your chosen business. Which of these do you possess? Does someone else in the firm have the expertise that you may lack? Will you need to hire someone to complete certain tasks? Which tasks and is there specific expertise required? If you hire, how much will you pay your workers?
- Identify your competition. How is your product or service superior to theirs? What are your competitors not doing or what can you do better and why?
- Describe your products or services. How much demand is there for them? Will you sell to people in the immediate area or have a larger distribution area? Should your business be located close to your buyers?
- Decide how much will you charge for your product or service. How many must you sell to breakeven?
- Consider marketing. How will you advertise or get the word out to your buyers?
- Determine if you will need special equipment and what it will cost to purchase or lease and operate.
- Review or estimate your monthly operating expenses. Ponder this very carefully, being certain that no areas are overlooked. Have your accountant or a trusted advisor review your projections.
- Review or estimate your monthly revenue. Do you expect to receive it immediately or will there be a delay?
- Determine cash flow. Use your revenue and expense estimates to determine how much money you will have at the end of each month over a two year period. How much money will you need to make up for losses until you can make a monthly profit?
- Explain how the business will be managed. Think about the insurance you will need, agreements you may need to sign and any certification or permit issues to be resolved.
Many entrepreneurs have trouble with the financial part of business planning. Here are some articles that may help:
- Preparation Matters When Applying for a Business Loan
- Understanding Accounting Basics Empowers Business Owners
- Pricing a Product Takes Research, Objectivity
- Know Your Business Breakeven
- Keeping an Eye on Cash Flow
- Cash Flow: Timing is Everything
- Cost Behavior: Turning Your Small Business into a Profit Powerhouse