This article focuses on business plans for small business startups. The first place to start when you start a new business is to write a business plan. A business plan is a document that describes the current and anticipated future activities of a business. It describes the short and long term goals of the business and explains how they are to be achieved over a given period of time. This section briefly outlines one possible format for a business plan and goes on to discuss some important concepts to think about when writing your business plan.
A business starts with a vision. Entrepreneurship, with the goal of starting a new business, starts with your vision. Do you have a clear vision of your company? If not, ask yourself what you love to do, what’s your dream, what do you believe in and what do you stand for. This is the best place to start. From a retail perspective, you could ask yourself what type of store do you like to shop in and why. What is it that you dislike about certain stores and how might you improve on it? What are your motives for starting your own company? You will need emotional commitment to it to sustain you through the difficult times. If your main reason is to be free of an unappreciative bossy boss then all you’ve come up with is a reason to leave your current job, not a reason to start a business.
If you were working for a large corporation in an entrepreneurial capacity, your personal vision would not be the best place to start. The business mission statement would be provided to you and you would start with that. From there you would be looking for opportunities with the strengths, weaknesses and threats of the corporation as a whole in mind. The strengths, weaknesses, opportunities and threats of a large corporation are quite different from those of an individual. Corporate venturing is defined as entrepreneurship within a corporation where an individual identifies opportunities, gathers resources and carries the opportunity to completion.
Your new company’s mission statement is really a statement of who you are, your values and what you love. Because of that, much of the discussion here regarding marketing, the customers you plan to serve and the process of identifying those customers and other topics may not seem critically important because you may have already decided what you want to do and how you are going to do it. Perhaps you don’t need financing. Even if you are not planning to apply for small business financing, it is advisable to write a business plan.
What if you don’t know exactly how you are planning to make a profit? Write what you do know and fill in the details as you go along. It’s a myth that you need to know every single detail before you start your business.
You can figure some of the details out along the way by asking lots of questions and seeking out information resources. Update your business plan often.
Never underestimate the importance of any of the small steps you take to achieve your dreams. To increase your chances of success, your business should be something that you already know how to do or are currently doing right now. These technical skills are critically necessary. Also, it needs to be a good business idea to have a chance of success. Also, there needs to be a market for it (potential customers). The market should not already be too competitive. Your business plan will serve as your guidepost and inspiration when tough decisions need to be made.
The Business Plan Format
There are several formats to choose from when writing your business plan. You can do some research and choose a format that works best for you. The format of a typical business plan could be as follows:
1. Preview – cover sheet, table of contents, executive summary
2. Description – introduction, business, industry, products, services, customers, competition, summary
3. Sales & Marketing Plan – introduction, company image, brand image, marketing goals, marketing strategy, positioning, marketing tactics, positioning, selling, advertising, summary
4. Management Plan – introduction, who will you hire as employees and consultants, research and development, production processes and contingency plan for possible disruptive scenarios, summary
5. Financial Plan – budgeting for cash flow and profit, budgeting startup costs, preparing a balance sheet and estimating how much financing you will need, breakeven analysis, summary
6. Summary – summary of summaries.
The cover sheet should be one page and include the name of the business, "Business Plan", the date, your name and your contact information. The executive summary is a brief statement summarizing the business plan that should not exceed one or two pages. At the minimum, it should clearly explain your business idea, how much profit you expect to make in the years to come and a marketing plan that outlines how you plan to make money. You should briefly state how your customers will benefit from your business’ offering. It should also state how you aim to have a competitive advantage. It should contain a brief summary of your management plan.
Describe the business, the business structure, the nature of the business, your business experience, the type of customers it will have, the mission statement, the vision, the slogan, the tag line, the location, the price levels, the pricing strategy, the industry (what industry, growth of industry), the products and services you offer, the competition, the marketing position (how will customers view your company) and the pricing strategy.
Sales & Marketing Plan
This plan includes objectives, strategies and programs of action for achieving those objectives. Writing this plan could start with brainstorming. Always think in terms of how your products and services will benefit the customer,
as well as the features you offer. How can customers use your product or service? What needs are satisfied? Will customers benefit by saving time or money, for example?
Marketing – What is your target market? What is and what will be your share of the target market? How will your company reach and sell to that target market. There are 3 ways to increase profit: increase prices, lower costs and increase volume of sales. To increase your sales volume you can either increase your market share or increase your market size. You marketing strategy is part of this section.
Positioning – How will your customers view your product and service offering in the marketplace?
Advertising – What types of advertising will you do, how often and for how much money? How will your customers view your company? What image will they have? How will they acquire and hold on to this perception? What’s your message and what will you keep doing to back it up?
The management plan is all about who is going to do the work and how it will get done. It can also be called the operations plan. Who else can do the work if someone gets ill? Will the company need to hire any employees? If so, when, how many and for how much money? There is more information to be included here as well, including where people will work. What are the critical success factors of operating the business successfully? In other words, what must be done well to be successful? What are the risks, actual negative factors, potential problems, and potential changes to the business' environment (information technology, markets, social attitudes, legal issues, political issues and economic circumstances such as recessions or periods of growth)?
Essentially, this section describes how you plan to make a profit and pay back any debts. The Introduction to this section will describe those plans. What are the start-up costs? What is the current balance sheet look like. What is your projected cash flow? What is the projected profit? What will the balance sheet look like down the road?
The summary will include statements from each of the above sections.
Tools to Help You Write Your Business Plan
The following discussion will help you in preparing your business plan. The business plan that you write should written by you. These tools are only mentioned here in a checklist format to help with ideas. Doing research on business plans and using samples of business plans to write your own is recommended.
Strengths Weaknesses Opportunities Threats (SWOT)
After you have identified your strengths and weaknesses, you need to do a SWOT analysis, or as it's also called, a situation audit, or situation analysis. After that is done, you need to find where your strengths and opportunities fit together. Look at your strengths and find an opportunity. For example, your strength may be in your passion and knowledge about a certain product or service. Opportunities can be found by analyzing the market from a consumer's perspective. For example, in your field of interest, ask yourself what things do consumers complain about? Perhaps you can help them better satisfy their needs. What products and services are customers interested in? You can also do a SWOT analysis for each of your main competitors.
This analysis will help you to identify your threats and opportunities of the SWOT analysis.
- Social/Demographic – income distribution, demographics, age distribution, education, fashion trends, labor, lifestyle
- Technological – new inventions in materials, energy use and costs, product life cycle
- Economic – economic growth and recession, interest rates and monetary policies, inflation rates, consumer confidence
- Environmental – environmental impact of activities, recycling, energy use and conservation,
- Political – political stability, safety regulations, political party agendas
- Legal – employment laws, contract laws, laws regulating landlords and tenants, bankruptcy laws, tax laws and regulations
- Ethical – bargaining in good faith with suppliers, representing honestly the products you are selling
A description of the industry in general is necessary. How attractive is your industry? Is it a difficult one to do business in? Does it require a large investment of capital or a modest amount? The competitive forces model of Michael E. Porter is a strategy tool that helps to identify the attractiveness of an industry.
- Entry of Competitors
- Threat of Substitutes
- Bargaining Power of Customers
- Bargaining Power of Suppliers
- Rivalry Among the Existing Players
Goals and Objectives
Once you know what you want to do you need to create objectives. Goals and objectives are similar but not exactly the same thing. Goals are larger and more long-term than objectives. Objectives fall under three categories: Business, Marketing and Financial. Peter Drucker, in his Management by Objectives model outlined the SMART method. In order for objectives to be truly useful they must be Specific, Measurable, Achievable, Realistic and Time-related (SMART). Sometime the "A" in SMART is changed to "Action-Oriented". Peter Drucker states that a manager's job should be based on tasks, the performance of which will help obtain a company's objectives. The primary objective of business is to serve customers. Drucker believes that the driving functions of business are marketing and innovation. Both of these functions drive "top line" sales. Goals should be committed to paper. It may take several re-writes to ensure that the are clear, understandable and specify actions required to achieve them. Your goals should be periodically reviewed and updated to keep you on track.
Business objectives are often stated in financial terms. How much profit do you want to make and by when? How will you do it? What level of market share are you striving for by when? Do you want to be a low-price high-volume seller, a high-priced high-service seller or some other combination? Are your products innovative and unique? From these business objectives come the marketing objectives. How are you going to achieve it from a marketing perspective? Look at the relationship between our company’s products and services and our existing and potential customers.
The Profit Objective
Business objectives include making a profit, among other things. Profit, or net income, can be looked at from the following equation: Profit = (Selling Price per Unit – Expenses per Unit) x Sales of Units – Other Expenses. Your business objectives should address all four elements on the right-hand side of the above equation. The sales of units depends on the total size of the market and your share of that market. As a new retail business, you will be focusing on increasing your share of the market from zero (before your store even opens) to some estimated percentage of the market. The discussion below on market segmentation will help with determining that estimate.
Sales of Units – There are three main ways to increase your numbers of units sold: gain more market share within your target market, increase your target market size or expand your goods and service offering to enter new markets.
Price – If you could increase your selling price and still maintain the same sales volume you would increase your profit all else being equal. What can you do to support the price you charge?
Management and Human Resources Objectives
So far we have briefly discussed some of the business objectives and discussed in more detail some of the marketing objectives. The Balanced Scorecard of Kaplan and Norton contains concepts that can help with these two areas and with two more areas: management objectives and human resource development objectives. The Balanced Scorecard method is an analysis technique designed to translate an organization’s mission and vision statement and overall business strategies into specific, quantifiable goals, and to monitor the organization’s performance in achieving these goals.
These objectives include your internal business processes for managing your information and merchandise in the world of retail. This includes procedures for purchasing goods, receiving them, ticketing them, displaying them and keeping track of all of the information that goes along with this. Well-managed businesses have defined their management objectives. Even if you are not sure what policies to adopt, write some ideas down. Discuss these with other people. Research what other stores are doing.
Human Resource Development Objectives
Technology, among other things, changes quickly. In order to not get caught off guard, always strive to increase your knowledge. Pass that knowledge on to your employees. The more they know about fashion and fabrics the more service they can give to customers thereby increasing customer satisfaction and sales.
An entrepreneur is someone who gathers, organizes and manages inputs to produce outputs to earn a profit. Entrepreneurs take risks and assume the consequences of those risks. They recognize opportunities, gather resources and plan the activities needed and executes those activities to completion. Entrepreneurs are focused on opportunities, innovation and growth. Entrepreneurship benefits society by providing economic growth, new industries and new jobs. Successful entrepreneurs require a broad range of skills and engage in a broad range of activities. Since no one person has all of the skills or time required to do everything that the business requires, entrepreneurs need to be self-aware and able to seek out and persuade others to join their skills to the business when possible.
Starting a business isn’t for everyone. It takes a certain type of thinking or "mindset". The good news is that the mindset of the entrepreneur can be learned. Entrepreneurs are comfortable with an uncertain future and they know that with persistence Answers will be found. Persistence requires belief and a positive attitude. It requires hope. Don't underestimate the importance of a positive attitude. Turn disadvantages into advantages by viewing problems as opportunities. Having self-control to do what’s necessary when it’s necessary can keep things moving forward during tough times. Entrepreneurs can remain calm during tough times by keeping their goals and objectives in the front of their minds. Passion and drive always remain. Growth, not stagnation is the focus of the entrepreneur. Entrepreneurs know that failures and difficulties are inevitable and they are not afraid to fail because they know they can forgive themselves and move on. Accepting responsibility for their actions and admitting their shortcomings are part of the entrepreneur's way of life. Entrepreneurs think creatively and focus their energy on new ways of thinking when old ways don't work. They know that just because they said "no" to something doesn't mean that they have given up. Entrepreneurs know when to ask for help and they know that they can learn from the knowledge, wisdom and experience of others. Entrepreneurs know that they don't have to make the same mistakes that others have made just to learn a lesson. Entrepreneurs are resourceful, courageous, reliable, self-confident and results-oriented.
Life as an Entrepreneur
Going into business for yourself has advantages and disadvantages. Being an entrepreneur allows you the freedom to make your own decisions, choose your own working hours and create your own working environment. As long as the business is financially successful and operates within the law, then nobody can fire you but yourself. As an entrepreneur you will have more financial opportunities. On the other hand, you may not make much money, particularly at the beginning. You may need to invest a lot of your own money into the business. As an entrepreneur you lose easy and inexpensive access to employment insurance benefits. As an entrepreneur you will need to work hard and may have less time for other interests. You will also need good health and endurance.
In the book E-Myth by Michael E. Gerber published in 1985, he states that there are three personality types that exist with every person that will be important to being a successful business person: the technician, the manager and the entrepreneur. The E-Myth states that those people who are experts or very knowledgeable in the technical aspects of a good or service will also be expert at running that sort of business. He states that is not true. Business management requires a separate set of skills that need to be learned to be successful. This way of thinking is not unlike the other myth that states that if you build a better mousetrap the world will beat a path to your door. A successful business owner must assume the roles of the three characters mentioned previously. E-Myth has been used as a verb to refer to the adding of internal systems that control business processes. Franchises have done a very good job of setting up these systems. The flows of money, materials and work are carefully designed so that business activities are predictable.
The entrepreneur is the person who is creative and looks to the future. Entrepreneurs provide vision, drive and will alwaysbe asking “what if…?”. The manager is the organizational person who primarily looks to the past. Managers design the business and organize it to be efficient based on systems that have worked in the past. Managers work toward the goal of balancing the maximizing of output with the minimizing of input costs. The technical person is the one who likes to figure things out.They like to know how things work. They live in the present. They provide labour and provide the product or service. Managers are concerned less of how things work and more of that they are working and how to fix them and make them more efficient. Entrepreneurs are concerned with the things themselves and are always asking if they are the right things to be working on and working with in the first place.
Michael E. Gerber has found that many business owners need to to spend more time working on managing the business and more time in the entrepreneurial mindset to come up with new ways of doing things and to find more opportunities.
Personal Goal Setting
Achievers set goals. Setting goals helps you decide exactly what you want and helps you to map out how to get there. A goal is a long-term vision that also gives you short-term motivation because when you work toward a challenging goal, you feel motivated and your confidence and desire grows. Goals provide a way to measure your performance. Goals help you focus your time and effort, avoid distractions and set priorities. For large long-term goals to be reached, a strategy or path of a series of short-term goals will be needed. For inspiration, look to leaders and scholars in your field. Learn the best practices and look for new and better ways of doing things so that you can work smarter towards achieving your goals.
Types of Goals
There are many types of goals. One type of goal is based on performance. A goal might be set to be more efficient and productive at specific tasks. Another type of goal might be to learn new skills or improve existing ones. Another type of goal is to complete a specific project by a specific date. Another goal might be to meet new people and build relationships.
Personality Types & Goals
Personal development coach Rodger Constandse has identified four basic goal-setting personality types, or archetypes, that represent natural human tendencies and traits: the warrior, the explorer, the diplomat and the scholar. Many people demonstrate all four types but most people have one dominant type. The warrior is focused, goal-oriented, likes challenges, poor at planning, is surprised by obstacles, impatient and is so goal oriented that they may forget their ultimate mission. The explorer is good with people, curious, has broad horizons, has big dreams but lacks focus. They may need help figuring out what they want and how to get there. The diplomat is skilled at building relationships, responsive focused on others and has difficulty focusing on themselves and their own goals. The scholar is motivated by the pursuit of expertise, is capable, detail-oriented, passionate about being knowledgeable, good at planning but spends too little time doing, risk-averse and they may need help developing long-term goals and plans for achieving them. They need to be reminded to follow through. Recognizing these strengths and weaknesses in yourself can help you to make adjustments.