Commerce: The essentials of business planning
When preparing to write your business plan, there are a number of key questions you should be asking yourself.
To begin with, what’s your idea? In simple, straightforward terms, write down what your business idea is. If you can’t explain the essence of your idea quickly and simply, keep working on it until you can.
How does your idea address a need? This is where you get to explore the true potential of your new idea. There are two basic types of demand in the marketplace-a “want” and a “need.” A business that addresses a need is always more promising than one that addresses a want. With that said, it is important to have a clear understanding of who your target market is.
What model suits you best? Figure out a business format that best fits your lifestyle and offers the most direct route to success with the biggest potential payoff. The clearer your business model is, the easier it will be to figure out your revenue model. The model you choose can dramatically change when, how and in what form you generate revenue.
What’s so different about what you offer? To answer this question, you must do your research! You can almost bet that someone’s going to come up to you as you’re charting a course to get into business and say, “Hey, did you know that XYZ Company does exactly what you do?” If you’re prepared, you’ll be able to answer, “Yes, I do know them, but this is how we’re different.” You have to be master of your domain-the subject matter expert.
How big is the market and how big will you grow? Exploring the market and understanding the growth potential for your idea is essential. To get a handle on this, you have to understand the demographics of people in your target market. Begin by placing those people into categories based on their level of need for the product or service you are offering.
What’s your role going to be? To answer this question, consider all the activities you love to do and the kinds of skills that you enjoy using. Maybe you’ll realize for the first time that you don’t want to go into this business alone. Maybe you’ll want your role to center on the “people kind of stuff” and leave the mechanics and “back of house” tasks to a partner or a key employee. But most importantly, know what you are good at and where your strengths lie. If you are not a numbers person or flourish at bookkeeping, it would be best to consider hiring an accountant for these types of tasks as they relate to your business, which leads me to the next question….
Who’s on your team? This is where thinking about your team members comes in. One of the key factors that will separate your business from the competition will be the people you choose to work with. Give serious review to the team you pick to start and run your business. Your success depends in large part on them.
How will customers buy from you, and how much will they pay? Outline in detail just how you plan to get your product or service out to the market. This includes describing how you’re going to manufacture your product and how you’ll deliver it. Will it be sold over the Internet or from the shelves of your own brick-and-mortar store? Will you have distribution into the “big box” retailers or use a national network of sales reps? Just remember that you must have a well-defined and achievable plan in order to get what you’re selling in front of your customers.
How much money do you need and how much will you make? This is where you need to start mulling over your financials. The two fundamental ingredients here are the expenditures required to transform your idea into a viable, operating business and the revenues that that business will generate. You’ll start by identifying just how much you’ll spend on things like the physical location of your business, product development, travel, legal fees, inventory, office supplies, marketing and salaries for your employees, if applicable. You are going to want to be as thorough as possible. Talk to other people in your field, join an entrepreneur networking group such as the Northwoods Entrepreneurs Network or Northwoods Women in Business, and pick their brains about how much it cost them to get started. Then rough out your revenue projections. This should be the exhilarating part. It’s when you start to see how your idea will turn into actual dollars.
Where’s the startup money coming from? By answering the previous question, you’ll learn two of the most important things you’ll need to know when answering this particular question. You’ll learn how much money you need and how much you think you’re going to make. Now start thinking about where to get the capital to get your business off the ground. Consider sources such as banks or credit unions, friends, family, angel investors, micro-lenders or community revolving loan funds.
How will you measure success? Success is defined based on individuality and means something different to each person I ask. For so many people, money made is the big measurement of success. However, while financial achievements will be fundamental to the viability of your business, there’s more to gain from running a business than just making money. It’s important to define what success means to you.
What are your key milestones? Create a chart that shows dates when you expect to achieve key milestones as your business launches and grows.
While taking into consideration what you should begin thinking about before preparing your business plan and starting your business, you should also consider what to avoid. Place some reasonable limits on long-term, that being over one year, future projections. It is far better to stick with short-term objectives and modify your plan as the business progresses because far too often, the reality of your business can ultimately become different from your initial concept.
Avoid optimism on both the high and the low side. It is far better to be extremely conservative in predicting capital requirements, timelines, sales and profits. Few business plans correctly anticipate how much money and time will be required. Also, don’t simply rely entirely on the uniqueness of your business. Success comes to those who start businesses with great economics and not necessarily great inventions or business ideas.
And finally, never skip the step of preparing a business plan before starting. I’ve said it before and I will say it again…a business without a business plan is a plan for no business!
A former business owner herself and graduate of the Urban Hope Entrepreneur program out of Green Bay, Michelle Madl-Soehren is currently the business development coordinator for Nicolet Area Technical College, where she assists and coaches new and existing entrepreneurs and small business owners with business plan development, provides professional development workshops throughout the area and coordinates and teaches Nicolet College’s eSeed Entrepreneur Program. She holds a baccalaureate degree from Mount Mary College in behavioral science and a master’s in management and organizational behavior from Silver Lake College. Madl-Soehren is also the current president of Northwoods Women in Business and past president of the Northwoods Entrepreneurs Club, and sits on the state advisory board for the Small Business Development Centers. She may be contacted at [email protected] or (715) 365-4492.