Skip navigation
2008
SBC Team

Business Plans

Posted by SBC Team Sep 19, 2008

Do I Need One? How Do I Go About It?

 

By Christopher Freeburn


You're ready to take the plunge. You have a good idea for a new business. You've done the requisite soul-searching and determined that owning your own business is the thing for you. You've spent some time researching the idea and you've figured out where you will locate the business, who your customers will be and what sort of market exists for the business. Now it's time to sit down and create a real business plan.


Benefits of a business plan
There is no understating the value of having a properly written business plan. A business plan helps to clarify the challenges you will face when trying to get your business off the ground. It helps you anticipate problems and obstacles in advance and thus work out solutions before you actually run into trouble. It allows you to make a reasonable estimate of how much money you will need to get things going and to keep them going through the early days. A well-researched plan can give you a handle on how much revenue to expect and how to target your business's promotional efforts.
Writing.jpg

 

Business plans are not for your eyes alone, however. If you need to borrow money to get your business started, having a professional looking business plan is crucial. "You want to demonstrate to any potential lender that you are serious about your new business and that you have a good idea of what running it will entail," says Martin Lehman, counselor at the New York chapter of the Service Corps of Retired Professionals (SCORE). By providing potential lenders with a well-drafted business plan that deals honestly with potential expenses and problems and demonstrates that you have done the necessary market research, you greatly improve the chances of landing that loan.

 

Anatomy of a business plan
In general, most business plans follow a basic format.

 

Executive summary: The purpose of the executive summary is to define the business-what it does and why you are the best person to run it. The summary should be no more than a few sentences, a paragraph at most. The idea is to convey your business's basic activities as concisely as possible.

 

Market Research: Follow the executive summary by making a case for the viability of your business in the marketplace you've chosen. Is there enough consumer demand to keep your business going? Are there enough potential customers in the given area in which your business will operate? What are the costs of getting the business started? What sort of revenues can you expect in the first year? What will be the cost of rent, utilities, office supplies, equipment, and materials for your products or services? Are there any competing businesses similar to your own in the same area? How does your business differ from them? Government publications, industry publications, trade groups and local chambers of commerce are excellent sources of demographic and marketplace data that you can use when compiling your research. Be as realistic as possible.

 

Business Outline: Here you will sketch the anatomy of your business. Identify your management structure, supply chain, and operations. "Be as detailed as you can," advises Lehman. "This is the time to work out fundamental questions about how everything in your business will work." Ask yourself the basic questions. Where will your business be located? Will it be a sole proprietorship, a partnership or a corporation? Who will be the owner? Are there employees? How does it provide products or services to customers? Who are the suppliers? "Iron out ownership and decision making roles ahead of time," advises Lehman. "Who gets the final word on things? If there are other people involved in the business, this is the time to figure that out." If there are partners or employees already in place, make sure that their duties and powers are well defined.

 

Marketing: The business plan should make clear exactly what you are selling and how you plan to let potential customers know about your business. Detail any advertising plans and their likely cost.

 

Cash Flow: How much money will your business need to get started? How much revenue can you expect from operations? This is an extremely important part of the business plan, and the one that requires considerable research and attention. Try to estimate, as best you can, exactly how much it will cost to keep things going for the immediate future and how much revenue you think your business can reasonably gain. "This can be really difficult for the first time business owner," Lehman warns, "If you don't have an established track record to draw on, you are going to have to make an educated guess. This is where your market research becomes essential." Lehman says that the biggest mistake new business owners make is being too optimistic with their revenue projections while underestimating costs. "Then they find themselves stuck with higher than expected bills and too few customers and they can't afford to keep things going," he says. It's better to err on the side of pessimism when estimating costs and potential revenues. Potential lenders or investors appreciate a little pessimism in financial projections since it indicates a more realistic outlook on the part of the small business owner.

By Adducent

Perhaps you need to do something new, a change from what you've been doing or you hope to build the financial security you aren't able to find by working for someone else. Maybe you can't find the right job to suit you and having your own business could be the solution. Whatever the reason; if you have the "itch" to have your own business you have two choices:

Do you start a business?

Do you buy a business?

Why start a business when you can buy one?

A start up:

  1. Has no customers.
  2. Has no track record.
  3. Has no infrastructure.
  4. Has no inertia. Everything is at square one.

There's a lot to learn about starting and running even a small business. Everything required to launch it is on you as the entrepreneur.

An established business:

  1. Has customers.
  2. Has a track record.
  3. Has an infrastructure.
  4. Has inertia. You become part of a business that is moving.

Generally, when you buy a business there is a transition period between you and the former owner helping get you used to the business. And there are usually experienced employees that know the details of the business operations. That help can be invaluable in cutting down your learning curve if you are new to business ownership or to that type of business.

ADDUCENT-logo-url.jpg

Why buy a business when you can start one?

A start up:

  1. Can be molded exactly the way that you want it.
  2. Starts with a clean slate; no potential for anything in the past popping up that may be a problem to address.
  3. Can easily be a 1-person operation with very low overhead to support.
  4. Has no personnel management or significant administrative requirements.

An established business:

  1. Has a defined business model that you must fit into initially.
  2. Has a history, some of which may be unknown to you as the new owner.
  3. Usually has overhead to support.
  4. Usually has some personnel and administrative requirements.

Also, keep in mind:

 

It is usually easier to get funding to buy a business; established businesses have better access to capital and more opportunities to raise capital than does a start up business. Many start up businesses can be done on the "cheap" with the entrepreneur putting the effort and their own money into the business to get it launched.

 

If you don't want to undertake a financial or management burden of any size ... then you may want to start a small, single-person business where you have total control without management hassles and no overhead to support. That might work best if you are a person with a specific skill-set that translates into a service business.

 

If you want something that is more "turn-key", where you can step onboard a business already moving then you may want to look at buying a business. That might work best if you are more of a "manager" type and want to grow the business into something more substantial.

 

The above is all food for thought; and going into business requires a lot of thought on your part.

 

Bottom line it comes down to the one most important deciding factor.

 

Want to know what that is?

 


You! The option that has the most in favor and matches your own mindset should be the one you go with.

 


Remember, having your own business should begin with you thinking through what it is that you want to do, and what best suits you.

Filter Article

By tag: