A small business must solve a problem, fulfill a need, or offer something that the market desires if it is going to be successful. How do you know if your idea does any of these things? Several tools can be used to measure the desire for the business idea in the market, including research, focus groups, and trial and error.
Make sure that by the time you have finished researching that you can fully answer these questions:
• Who needs it or who wants it?
• Is there are a need for the products/services this business would offer?
• How would the business fit into the market?
• Is there a product/service on the market that is similar to the idea already?
• What is the competition like and how would the business win over customers?
These questions should spark more questions regarding the business idea that should be answered before going any further. Chances are, if you can answer more than one of these questions, you have a great business idea.
A business plan is one of the most important plans that will be created in order to turn the business idea into reality. It is a blueprint that will guide your business, and give it a foundation, from the start-up phase through establishment and growth. Business plans also help investors determine if the business is worth investing into and whether it will make it past the first few stages of development.
There are quite a few templates out there that you can find to help you write a business plan, but we’ll go through some of the major points in writing one.
• Executive summary: This will tell the reader of the plan what it is you want (i.e., money). This is a very important item to have because the reader doesn’t have to go searching through the entire report to figure out that you want a loan of $10,000. Instead, it’s directly after the first page of the title page.
• Business Description: This will be a short summary describing the industry of the business. In this summary, you should include the present outlook and future growth within the industry and explain where your business fits in.
• Market strategy: This includes an in-depth market analysis that shows that you know who your target market is and how you plan on advertising directly to them.
• Design and development plan: This section provides investors with a description of the design of the product, shows development within the context of the products offered, marketing and the company itself, and shows a development budget.
• Operations and management plan: This section is used to describe how the business functions, including the responsibilities of the management team, the tasks of each division within the company and the capital would be needed to start the operations for the business.
• Financial factors section: This is used to show how much money needs to be put into the company as start-up costs, how much sales are expected in the first few years, and how the company would be financed. To do this, you’ll have a finance plan.
A finance plan is an evaluation of an investor’s current and future financial state by showing the currently known variables that are being used to predict cash flows, asset values, and withdrawal plans in the future. This includes accounting factors such as tax liabilities of the company, asset allocation, estate plans, and current net worth of the investor and company. There are also quite a few templates that can be found to help create a financial plan, but we’ll discuss the key elements that need to be included.
• Financial goals: The financial goals of the company should be quantified and have milestones to track progress. Some of the goals that could be included are purchasing an office building or hiring employees.
• Sales Forecast: This should be a spreadsheet or chart that shows the projected sales for your business over the next three years.
• Expense budget: In order to make your sales forecast a reality, you’ll also need to show the number of expenses that will require those projected numbers.
• Personal net worth statement: This is a snapshot of the assets and liabilities of the company to help measure progress towards meeting financial goals.
• Cash Flows Analysis: This will show the cash outflows and inflows that help you determine how much needs to be set aside each financial period in order to pay off debts, investments, and savings.
• Breakeven analysis: This should show when your total revenue from sales will exceed the costs that are required to produce the goods/services that your business is selling. This is important for potential investors because it shows how quickly you’ll be able to have a positive net income.
• Long-term investment plan: This is used to set guidelines for selecting, buying, and selling investments.
• Tax reduction strategy: Identify ways that personal income taxes can be reduced, this could mean choosing tax-favored investments.
These five elements are only a glimpse at what is included in a financial plan, in order to complete a thorough and complete financial plan an entrepreneur should talk to a financial expert and look at a financial plan template. Keep in mind that not every financial plan will be the same: it all depends on the type of business you want to start.
Once all of these sections are put together and polished off, you’ll have a business plan to get your business started.
A business plan is only the beginning of starting up your own small business; you’ll still need to get funding, find investors, hire employees, name your company and pick a location, and so much more. But the business plan is the most important foundation that needs to be completed before any of these other steps. If the business plan isn’t complete or fully discuss the aspects of what you want to accomplish there is no way for you to create a small business that will continue to grow for years to come.
Starting a small business takes a lot of time, research, and effort, but in the end, it can be one of the most rewarding experiences ever. These tips on how to start a small business are just the starting point, but they are some of the most important steps.