Very few new small businesses put together a business plan before they open, but they should. Most small business fail in the first few years and that could be avoided if they had created a business plan prior to opening the business. Too many business owners think they have a good idea or have a special skill that warrants them to open a business, but soon discover the skills you have in your trade or profession are different than the skills needed to make and run a successful business.
Having a business plan will reduce the risk factors and disclose undetected problems that could occur when
you open the business. A business plan should be made up of the following:
- A Description of the Business – go into detail and clearly define your vision, goals and objectives. This will help you organize and clarify your thoughts.
- A Market Analysis of your Product or Service –do research on your product or service. Talk to other similar business owners in you market. Be sure to research all the facts. Too often people give you opinions which are not factual. Deal with facts and not opinions, although opinions can be important. In your market analysis, include:
- An analysis of the market share availability. What is the demand for your product?
- Analysis of the competition. What do you offer that differentiates you from your competition?
- Who is your target market? Based on demographics, what are their interests, age, and average income of the client you’re looking for?
- An Actionable Marketing Plan – after doing the market analysis, create a plan on how you will market the business. This is where you estimate your sales, put a sales budget together which tells you how you plan on hitting your sales number. This is one of the most important parts. How are you going to reach your customers, radio, direct mail, phone calls? Then, what are you going say to them, how are you going get them to be your customer and buy from you, how many customers will it take, how much will you charge, how much do I have to sell to break-even. How much is it going cost you to bring in this business, market to it and generate those sales? All these are questions you will want to ask yourself to figure out how you will have an actionable marketing plan with specific goals and targets and how they will be achieved. The cost will be included in your financial projections discussed below.
- A SWOT report – a report that lists:
- Strengths-what strengths do you have that will differentiate you from your competition?
- Weaknesses- what could be your weaknesses that could cause you to lose business to your competition, prevent you from hitting your sales numbers or cause expenses to be too high?
- Opportunities-what are situations that would allow you to succeed?
- Threats of your business-what in the market place could cause you to fail?
- Financial Projections – there are two types of financial projections:
- Cash Flow Projections – these are numbers projected for the amount of cash necessary for startup and continuing operations. This projection includes all sources of income including loans, your capital contributions and revenue from the operations. It should define all capital expenditures including startup costs, loan borrowings, repayments, and investments or withdrawals of the shareholders.
- Profit Projections – these numbers measure the profitability of the business from operations and will exclude some of the items contained in the cash flow projections; it will contain only revenues and expenses and exclude items like loan repayments, borrowings, and cash inflows and outflows from investors.
Seeking guidance or help from an accountant may be required in preparing financial projections.
- Detail Plan on Staffing and Daily Operations – describe what needs to be done in the first few years of operations.
- What needs to be done on a daily and weekly basis?
- How many people will you need for staffing?
- What daily procedures do you need in place?
Plan your business or plan to fail. It is far better to invest time writing a business plan than to invest time and money in a failed business.
To continue learning about this topic sign up for our Strategic Planning and Budgeting Workshop workshop at www.ewhsba.com or for more information, contact EWH Small Business Accounting at 262-796-1040.