When you want to start your own business it is a delicate balance between learning on the go and planning ahead. There are so many unknowns along the way that constant learning is part of your job description. However, it is still worth to sit down and spend the time on working out a good business plan. It helps you to clarify your way forward and to communicate clearly about your business.
Depending on the size of the company the planning effort has to be adjusted accordingly. The basics however are always the same.
Be precise of what you want to offer. Define your product range, level of service, quality and pricing.
- Which (unique) value does your product/service provide to your customers?
- How many different products you want to offer?
- What are the main characteristics of your product? e.g. physical goods vs. service, consumption vs. investment
- What are the main cost components? e.g. rent, input materials, distribution cost, work time
- What are the basic requirements to offer the product? e.g. legistlation, memberships
Your clients will finally pay your bills. Make sure that you know as much as possible about them. Learn to understand how their preferences influence your product offers and ways of marketing.
- What end customers you are going to address? What are their needs?
- Which geographic area will you operate in? e.g. local vs. internet based business
- How do you reach your customers? e.g. online, shop, referals
- What types of customers are you working with? e.g. on-time vs. repeating customers
Get to know your competition and learn from them. Use the public available information to learn what their strength and weaknesses are. Use good examples as reference, learn from bad ones what you can do better.
- How many competitors are there? Who are the major ones?
- What are the success factors in your market?
- How is your product different?
- What can you learn from competition and how can cooperate with them? e.g. referral program, networking
- How will the react to you entering the market?
Strengths and weaknesses
To round up the basic information have a closer look your own team. Identify available and needed skills. Discuss openly what your strong and weak sides are. Have a look were you need help and what you can do own your own. Having a great creative idea about a new product is important. But to be successful you also need administrative skills, financial planing knowledge and much more.
In case in the beginning you can’t afford to outsource the skills you lack, be clear about them and force yourself to learn them. Maybe you might even learn to enjoy them and transform weaknesses into strengths.
After defining the previous four elements it is time to see how they fit together in a financial plan. Summarize the main elements of income and expenses. Learn to understand their dynamics.
- How many customers you need to be profitable?
- What are the major benefit drivers?
- What are the major financial risks?
- Overall – does it make sense to spend time and money to start the business?