BEFORE MAKING THAT FIRST STEP TOWARDS ESTABLISHING YOUR OWN BUSINESS, YOU MUST HAVE A WORKING BUSINESS PLAN. (DTI)
What is a “Business Plan”?
The primary value of your business plan will be to create a written outline that evaluates all aspects of the economic viability of your business venture including a description and analysis of your business prospects.
A business plan is an essential step for any prudent entrepreneur to take, regardless of the size of the business. This step is too often skipped, but we make it easy for you by providing a format to build your plan as you progress through this course.
Business plans can vary enormously. Libraries and bookstores have books devoted to business plan formats. But this is a place to start. You can then go on from here to design one that would be ideal for your particular enterprise.
Why prepare a business plan?
Your business plan is going to be useful in a number of ways. Here are some of the reasons not to skip this valuable tool.
- First and foremost, it will define and focus your objective using appropriate information and analysis.
- You can use it as a selling tool in dealing with important relationships including your lenders, investors and banks.
- You can use the plan to solicit opinions and advice from people, including those in your intended field of business, who will freely give you invaluable advice. Too often, entrepreneurs forge ahead (“My Way!”) without the benefit of input from experts who could save them a great deal of wear and tear. “My Way” is a great song, but in practice can result in unnecessary hardships.
- Your business plan can uncover omissions and/or weaknesses in your planning process.
What to avoid in your business plan?
Place some reasonable limits on long-term, future projections. (Long-term means over one year.) Better to stick with short-term objectives and modify the plan as your business progresses. Too often, long-range planning becomes meaningless because the reality of your business can be different from your initial concept.
Avoid optimism. In fact, to offset optimism, be extremely conservative in predicting capital requirements, timelines, sales and profits. Few business plans correctly anticipate how much money and time will be required.
Do not ignore spelling out what your strategies will be in the event of business adversities.
Use simple language in explaining the issues. Make it easy to read and understand.
Don’t depend entirely on the uniqueness of your business or even a patented invention. Success comes to those who start businesses with great economics and not necessarily great inventions.
Here are some suggested topics you can tailor into your plan:
- A vision statement: This will be a concise outline of what your business purpose and goals will be.
The people: By far the most important ingredient for your success will be yourself. Focus on how your prior experiences will be applicable to your new business. Prepare a resume of yourself and one for each person who will be involved with you in starting the business. Be factual and avoid hype. This part of your business plan will be read very carefully by those with whom you will be having relationships, including lenders, investors and vendors.
Templates for preparing resumes are available in your library, bookstores and the Internet under “resumes.”
However, you cannot be someone that you are not. If you lack the ability to perform a key function, include this in your business plan. For example, if you lack the ability to train staff, include an explanation how you will compensate for this deficiency. You could add a partner to your plan or plan to hire key people who will provide skills you don’t have. Include biographies of all your intended management.
- Your business profile: Define and describe your intended business and exactly how you plan to go about it. Try to stay focused on the specialized market you intend to serve.
- Economic assessment: Provide a complete assessment of the economic environment in which your business will become a part. Explain how your business will be appropriate for the regulatory agencies and demographics with which you will be dealing. If appropriate, provide demographic studies and traffic flow data normally available from local planning departments.
- Cash flow assessment: Include a one-year cash flow that will incorporate your capital requirements. Include your assessment of what could go wrong and how you would plan to handle problems.
Include your marketing plan and expansion plans and refer to helpful government websites such as the Small Business Administration.
Six steps to a great business plan
Start-up entrepreneurs often have difficulty writing out business plans. This discipline is going to help you in many ways so don’t skip this planning tool! To make it easier, here are six steps that will get you to a worthwhile plan:
- Write out your basic business concept.
- Gather all the data you can on the feasibility and the specifics of your business concept.
- Focus and refine your concept based on the data you have compiled.
- Outline the specifics of your business. Using a “What, where, why, how” approach might be useful.
- Put your plan into a compelling form so that it will not only give you insights and focus but, at the same time, will become a valuable tool in dealing with business relationships that will be very important to you.
- Review the sample plans we furnish and download the blank format to a MS Word document. Fill this in as you progress though the course.
Check out if your plan includes the following necessary factors which will produce a successful business:
- A sound business concept. The single most common mistake made by entrepreneurs is not picking the right business to begin with. The best way to learn about your prospective business is to work for someone else in that business before beginning your own. There can be a huge gap between your concept of a fine business and reality.
- Understanding your market. A good way to test your understanding is to test market your product or service before your start. You think you have a great kite that will capture the imagination of kite fliers throughout the world? Then hand-make some of them and try selling them first.
- A healthy, growing and stable industry. Remember that some of the great inventions of all time, like airplanes and cars, did not result in economic benefit for many of those who tried to exploit these great advances. For example, the cumulative earnings of all airlines since Wilber Wright flew that first plane are less than zero. (Airline losses have been greater than their profits.) Success comes to those who find businesses with great economics and not necessarily great inventions or advances to mankind.
- Capable management. Look for people who you like and admire, have good ethical values, have complementary skills and are smarter than you. Plan to hire people who have the skills that you lack. Define your unique ability and seek out others who turn your weaknesses into strengths.
- Solid financial control. You will learn later the importance of becoming qualified in accounting, computer software and cash flow management. Most entrepreneurs do not come from accounting backgrounds and must go back to school to learn these skills. Would you bet your savings in a game where you don’t know how to keep score? People mistakenly do it in business all the time.
- A consistent business focus. If you think of specific products or services you will find that specialists will outperform non-specialists. Zero in on something you can do so well that you will not be subject to competing with someone with a lower price.
EASY DOES IT
Aug 6, 2009
Easy does it
by Rafael Santos
from Entrepreneur Philippines Magazine, June 2001
Steadily building your business sometimes means you have to do it gradually
Although we have seen many businesses prosper from the get go, the reality is that majority of startup entrepreneurs can ill afford to go full throttle in the initial stages of a business venture. Whether you’re challenged by shortage of capital, latent responsibilities (kids to support, mortgages to pay) or both, the time-proven advice of taking things slow in the early stages, and pouring it on as the business concept takes root still holds.
And while many people think that being their own boss will equal instant financial success, entrepreneurs have found that it is often a slow and painful climb. That is why some people counsel starting up on a part-time basis. It may also help ease your way into the business and help you maintain interest and momentum.
Here are some tips to help you gradually grow your business and avoid flaming out:
1. Start small, and keep it simple. Two of the toughest things to overcome in the startup phase are the relative inexperience of the owner, and the lack of financial resources for a big initial push. Starting small often lowers your risk position, and makes it much less painful to quit the business if the idea proves to be a dud. If the business is proving to be financially viable, the profits you gain from this smaller venture can be used to expand or invest in bigger business ideas.
One of the boons would-be entrepreneurs have today is that we now live in an increasingly web-oriented world, where people can start a virtual store at minimal cost. This way, when you are ready to move into a brick-and-mortar setting, you have already established a working business model and structure to help sustain your products or services. Indeed, the majority of local startups are now flocking to social networking websites like Multiply.com or online retail service provider e-Bay to hawk goods and get some experience running an enterprise.
In fact, online businesses are so popular nowadays that many opt to stay completely online instead of setting up a physical store. Fashion label Maverick by Design, an outfit that sells unique LED clothes and accessories, has vowed to keep an exclusive online presence in lieu of a traditional store front.
“The overheads are lower, and we reach a wider audience through the internet. Physical stores require a whole new set of business and management skills, (and are) time consuming and often limiting in terms of reach,” company president Harry Hawson said.
2. Take a dip instead of a big plunge. Ditching your day job and instantly shifting to business full time may give you nightmares, especially if you’re not prepared for it. This is what happened to Aina Yupeco of Create!, a marketing and sales consultancy firm. Having left her cushy executive job, her first few weeks running her own shop proved to be an excruciating experience.
“I had big dreams, ideas, concepts, and I was so excited to put them into action. But reality bites; being a new company, I struggled to find clients. I cried when I had no sales the first two months, no money coming, and all my money tied into the business. It was tough,” she said.
Yupeco shares that she has learned that there is no hard and fast rule in business, and even starting with a significant war chest does not guarantee success. She says that people can opt to do it slowly and make a gradual transition of being an employee to becoming their own boss.
“Going slow gives you time to think, plan and work on potential problems, which should help lessen your anxiety. If I had a do-over, I would follow this advice,” Yupeco said.
3. Accelerate your learning curve. Even if you do start slow, you need to be able to learn fast. A thorough understanding of your business is crucial to its eventual success.
Trade associations often have information packets about getting started in that particular business, and most of them offer these things for free to their members. Shelling out some money to join groups will help a long way in getting your startup on the right track.
However, there is still no substitute for getting first-hand knowledge. By working for others in the same business, you can get a much better grasp of how that business works than you would through reading or research. This is particularly helpful if you plan to start a business where you’ve got zero knowledge.
You can work for a very short period of time in an entry level capacity. Some apprentice for a while just to develop a clear understanding of the business and create contacts. You will be able to observe first-hand how it is to work in that kind of business, hence allowing you to have a working knowledge base.
Despite the success of their Rocci deli and cafe, Trina Lim-Simon and Bea Magsino still struggle with the whole process of setting up a business. But with good planning and a defined market, they have since learned to roll with the punches. “We basically started with a plan; but had to adjust to all the changes that we learned along the way. That’s both the challenging and exciting part of the food business – there are so many aspects to the business from the product, to the people to the customers – that require you to adapt and continue to find ways to improve on the most efficient systems to put in place,” Trina says.
Smaller businesses have proven to be a great way to learn successful methods, and a great tool to iron out the little things that make a business click. By making a conscious effort of taking things slowly, you are potentially saving yourself from potential headaches and will make you better prepared to take your new venture to new heights.
More to come…