Step 2: Plan Your Business
The most common cause of failure with new businesses is either a lack of know-how or a lack of capital. Of all the new businesses in Minnesota that started in 2012, 57% of them are still in operation. According to the U.S Bureau of statistics Minnesota has one of the highest survival rates in the nation. The national five-year survival rate is around 50%.
A key component to ensure the vitality of a business is “business planning”. A business plan is a vital component for any organization; it can provide the business operational direction with respect to marketing, finances, objectives, and strategies to make the business successful. A good business plans assists entrepreneurs as they navigate or avoid short- and long-term obstacles to their business.
Venture capitalist and Silicon Valley pioneer Eugene Kleiner stated that:
“Writing a business plan forces you into disciplined thinking. An idea may sound great, but when you put down all the details and numbers, it may fall apart.”
The components to a successful business plan, as recommended by the U.S. Small Business Administration, are as follows:
- Executive Summary – a snapshot of the business.
- Company Description – describes the mission and what the business does.
- Market Analysis – research on the industry, market, and competitors.
- Organization and Management – business and management structure.
- Service or Product – the products or services the business offers.
- Marketing and Sales – how to market the business and the sales strategy.
- Funding Request – how much money the business will need over the next 3 to 5 years.
- Financial Projections – supply information such as balance sheets and cash-flows.
- Appendix – an optional section that includes resumes, permits, graphs, and other information.
Completing a business plan can seem as daunting a task as starting a new business. To make things easier, consider breaking down business planning into more manageable tasks.
Take the time to do the research. It is the business owner’s responsibility to know as much as they can about their industry or the clientele they might serve. Completing this kind of research will help to identify risk factors and allow business owners to be proactive in their dealings, rather than reactive. In addition to knowing where the risks lie, it is important to take the time to analyze the financial aspects of the business startup as well.
Numbers help tell the story. Working through the process of creating financial projections allows an entrepreneur to objectively evaluate the business’ potential for success. Financial projections help to identify how much money it will take to get the business started and realize long-term success. If additional funding is needed, it is imperative to have comprehensive financial reports and analyses for lenders/investors to understand the viability and potential of the business.
Once a business concept has been finalized, it is time to focus on creating a strategic marketing plan. Utilizing the information collected through the business plan research, identify and clearly articulate the situation, purpose, and plan for the business. What are some issues that could affect the market or the business, and what is the plan to alleviate such issues? Determine who the target audience is for the business and how they will benefit from using the business’s products or services. How will the business attract customers and clients? The final step in this section is to create specific objectives with marketing that are measurable in order to track effectiveness and realize goals.
Once these three steps are completed it is as simple as compiling and formatting the information into one cohesive document. To learn more about the components of a business plan and to review example business plans, visit the SBA’s Business Planning Guide or register as a Small Business Development Center client today and receive one-on-one assistance!
Plan on planning on!
Tune in next month to learn about Forming Your Business! Have questions or interested in getting on the fast track? Contact us today: firstname.lastname@example.org.