Tag: business plan

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Starting Up

Starting a Business — A Five Step Reality-Check to Evaluate Your Own Idea

Article Contributed by Jim DeLapa

One of the most frequently asked questions we receive is, “How can I be sure my new business will succeed?” Sadly, there is no crystal ball that can accurately answer that question. However, if you are serious about starting a business there are five steps you can take that will begin to give you a clearer picture. By following these steps you will gain tremendous insight into what lies ahead. Whether this reality-check convinces you to dive in, or hold back, you’ll be well served by what you learn. While we are huge proponents of founders developing a well written business plan, the steps below can be followed even before you start your small business plan.

Step 1: Write a simple elevator pitch to see if your business idea is compelling to others. If you haven’t created an elevator pitch before, you can stitch together the essentials very easily. Write a one sentence answer to each of the following questions. What problem will your company solve for its customers? Who has this problem and how large is that group? What will make your business unique so that customers will buy from you instead of a competitor? Finally, what are your qualifications to run the business? If you force yourself to write and re-write the very best one sentence answers to each of these questions, you will have the elevator pitch you need for this purpose. Now, try out your elevator pitch on 10 people you trust and respect to get their feedback and reaction to your well-formed business concept. This is the warm up for steps two and three.

Step 2: Talk to would-be customers to find out if there is a true need for your product or service. When you are thinking about starting a business, you obviously feel there is a void in the marketplace. Don’t wait until you open your business to find out if the need for another business is real or imagined. Armed with your elevator pitch, go have face-to-face discussions with future customers. You are not going to them to sell, or pre-sell. You are doing market research. After describing your business by generally following your elevator pitch, go into “ask and listen” mode. To get the information you are seeking, ask questions like, “How are you currently meeting your needs for (insert the products or services your company will provide)?” Listen carefully—this is the voice of the customer. In step one, you spoke to friends and respected colleagues. In step two, you are talking to people who currently buy products or services like those you will be selling. Select individuals who will be focused on the content of your ideas and less concerned about simply wanting to be encouraging.

Step 3: Become an expert on the competition. Identify 5 other companies that are already doing what you plan to do. Learn as much about them as you can. One of the best things to learn is if they expanding or shrinking. You want to be entering a business where the market and demand is growing! Take everything you learn and ask yourself what it says about the opportunity for your new business. If you can’t find any companies that already do what you’re planning to do, there two likely reasons: 1) There is not enough demand to support a business; 2) You didn’t look hard enough. The third possibility, and the one most often cited incorrectly, is that a genuinely new opportunity has been discovered, one that nobody else has ever thought of, and so there is no competition. Rarely is this the case.

Step 4: Develop a rough estimate of your breakeven costs. Think about the process of engaging the customer to the point of making a sale. What are all the things that you must have in place to make that sale? Do you need an office? A building? A sign? Computers? Phone service? Special equipment? Employees? Will you need to take a salary from the business from its inception? How much will you spend on marketing so that customers find out about your business? List all of the major items and estimate their costs for the first full year. Divide this number by twelve to see your total monthly fixed expenses.

To calculate their breakeven sales number, some types of businesses must also take into account their “cost of sales” or the additional cost that is incurred for each sale made. In a pure service business, such as consulting, there will be little or no “cost of sales.” A consultant sells his or her time. The breakeven revenue for this type of business would be the total monthly expenses calculated above.

Other businesses, such as restaurants or retailers have to take into account the cost of the goods they sell. For example, consider a company whose total monthly expenses are $10,000. If they sell picture frames for two times what they cost, they will need $20,000 in revenue to break even. The first $10,000 will pay for the picture frames and the next $10,000 will cover the base costs of the business.

Knowing your total costs and breakeven revenue requirements are essential in evaluating a business idea. As intended, this is a rough estimate which you can carefully refine if your business idea passes all your tests.

Step 5: Identify the person responsible for selling (and that person is probably you). Too many people start businesses without really taking into account how much will need to be sold, and who will be responsible for selling. In hindsight they say things like, “I always loved to cook, so I started a catering company.” “I worked as a carpenter for 10 years, so I decided to become a general contractor.” Upon starting their businesses, the chef and the carpenter immediately had the same goal–to become “salesperson of the year” in their respective businesses. When you start a new business, the business will fail or succeed based on whether or not you hit your sales targets. Regardless of who is doing the selling, the responsibility for seeing that the company sales goal is met falls on the founder. If you can say, “I am ready to be responsible for driving sales in my new company” then you have passed step five of the reality check.

Summary. If you take the time to put your business idea through the five-step reality check you will be well on your way to answering the question, “How can I know if my business will succeed?” You will have gathered all of the essential information to make an informed decision about starting the business. Next, take the foundation developed in the five-step reality test to start developing your business plan. You’ll find that the things you’ve already learned will give you a great head start.

About the Author

Jim DeLapa is the founder of GreatBusinessPlans.com, a leading provider of small business plan assistance for current and future small business owners. DeLapa has launched and invested in numerous successful startups and played an active role in nurturing two of those from inception through being acquired by publicly traded firms.

Categories
Starting Up

Writing a Business Plan? Start with a Great Introduction

Article Contributed by Jim DeLapa

When it comes to writing a great business plan, most soon-to-be-new business owners struggle with the same question: Where do I start? In this case, the age-old answer to that question is the best answer, “at the beginning.” The most important part of your business plan is a well written introduction.

If you are seeking investors or a small business loan, your introduction must hook the reader so that they will feel compelled to read the rest of your plan. The first thing a lender or investor will want to know is what problem your business will solve for its customers. That is what businesses do—they solve problems for customers so convincingly that customers willingly give them their money. The first objective of your business plan introduction is convincing the reader that people will actually give you their money to do for them what your business will do! An example will help to go through the steps.

If you were starting a lunch deli, shift your focus away from the savory breads, top quality meats, cheeses and vegetables. Focus on the problem you will solve for your customers. “Downtown workers struggle to find quality food, at a fair price, with a convenient location that lets them get back to their offices in fewer than 30 minutes. These downtown workers don’t want to hassle with driving and parking just to get lunch. They are simply not willing to spend an hour out of the office in the middle of the day.” That’s the problem and it begs to be solved!

Your next objective is convincing the reader that there are a sufficient number of people who have this problem to sustain your business. The exercise varies depending on the type of business you’re starting, but it all comes down to knowing the size of the market you can reasonably hope to reach. For our deli friends, this might be stated as, “There are over 6,000 office workers within two blocks of our planned location. With phone in ordering and delivery service we will have the opportunity to reach all of those customers five times a week.”

Next, preview your unique selling proposition to the reader—tell them what makes you different. You’ll be able to delve into the competition later in the plan. For now, just let them know how your business is unique in the eyes of the customer. Let the reader know in a convincing manner that your business will not be a “me too” business in a crowded market. “Our deli will be the only ground level restaurant with both dine-in and over-the-counter takeout serving baked or cold cut sandwiches on freshly made bread, within six square blocks of the Triple-Towers.”

Finally, speak briefly about your credentials for operating this business. Again, you’ll be able to go deeper in the management section of your business plan. For now, let them know you are the right person to be operating this business. Our deli friend might simply say, “After growing up and working in the family restaurant business for more than 15 years, Joe Hamm our founder is an expert with customers, vendors and employees.”

What has the introduction accomplished? We’ve identified that there is a problem to be solved. We’ve established that there is a big enough market to support the business. We have clarified that our deli will stand out in a crowded downtown environment. Finally, we’ve let the reader know about the credibility of the founder.

More importantly, we’ve done what every good business plan’s introduction should do. We’ve left the reader hungry for more. The only solution to that problem is for them to read the rest of the plan.

About the Author

Jim DeLapa is the founder of GreatBusinessPlans.com, a leading provider of small business plan assistance for current and future small business owners. DeLapa has launched and invested in numerous successful startups and played an active role in nurturing two of those from inception through being acquired by publicly traded firms.

Categories
How-To Guides

How To Create A Business Plan in 3 Simple Steps

There comes a point in every solopreneur’s business where they need to sit down and plan … and I mean, really plan! Not just write down a few ideas on the back of an envelope and hope for the best, but really map out a long-term strategic plan for their business.
Creating this kind of business plan is so important as, for one reason, it immediately eliminates a lot of the overwhelm and frustration that you’re probably feeling, but it also allows you to:
* See where you’re going;
* Know how you’re going to get there; and
* Lays out exactly what you need to do along the way to get from Point A to Point B
How do you know when you’ve reached this critical business planning point?
Well, there are a few indicators:
* You have LOTS of ideas swimming around in your head but don’t know how to pull them all together (lack of a Big Picture Vision)
* You offer several different programs/products, at different price points, but get very few or no sign-ups (lack of a strategic Marketing Action Plan MAP)
* You get feedback from your clients and/or customers letting you know that they’re confused and not sure which program is right for them (lack of a clear Product & Marketing Funnel)
Today I’d like to share with you three basic steps to business planning success so that you can start the year off on the right foot!
Step 1 – Create Your Big Picture Vision
This is the really fun part; it’s where you get to let your imagination run away with you. You want to sit down somewhere quiet with a pad and pen (writing is much better for this exercise as you can let your ideas flow) and start to write! Write about what you want your business to look like, the type of clients you want to serve, the sort of products and programs you want to offer – in fact write down anything and everything that pops into your head about what you want your business and life to look like.
Important: You want to write your Big Picture Vision in the present tense, as if you already have that business and lifestyle you’re writing about. Use terms such as, “I have, I own, I run”.
Remember that every part of your should say “YES” when you read your Big Picture Vision out loud!
Step 2 – Take Inventory
The next part is to take a look at where you are now and where you want to go. What needs to change in order to take you from where you are now to where you want to be? Is it:
* More/less clients
* More/less billable hours
* Offering more programs/products
And then create a timeline for making these changes. Put down dates of when you want the changes to have been made by, and set about implementing!
Step 3 – Plan Your Funnel
Now that you know what you want your business to look like and what you need to do to get there, start and map out your different income streams. The Product & Marketing Funnel is the perfect model for this exercise as it allows you to create different products/programs/services at different price points within your business. This way clients can move from free (your ezine and articles) to your paid info products, and eventually through to your high-end programs.
Follow these three simple steps above and you’ll instantly create a business plan that will guide your business to continued success this year … and beyond!
TraceyLawtonPhoto.jpgOnline Business Manager & Virtual Assistant, Tracey Lawton, supports professional speakers, coaches, and authors to operate an efficient, organized, and profitable business. Learn how to create an efficient and organized office in 7 EASY steps, and receive free how-to articles at http://www.OfficeOrganizationSuccess.com.

Categories
Franchise

Create a Winning Business Plan…

“A franchise is more likely to succeed with a projected plan for all eventualities: If you fail to plan, you plan to fail…”

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The old adage “If you fail to plan, you plan to fail” is especially important for first time franchisees. Those who understand the benefits of business planning are more likely to be successful and pro-active to management decisions, than are those who react to day-to-day operational issues. Franchisees who fail to plan strategically end up confronting problems head on and may be unable to manage the business effectively on a daily basis.
This type of business management can have a negative impact on the franchise, staff and other individuals involved in the operation. It can also leave very little time for any other business management concerns. Therefore it is necessary for franchisees to construct an effective business plan for their franchise system.
Your business plan will be the “sales document” for you and your business and its preparation should project the image of what you want for your business.
The following is a useful guideline on how best to approach drawing up a business plan and the key terms it should contain.
1. Introduction
• Purpose of the business and business concept;
• Overall business objectives;
• Legal status of the business stated; benefits and shortcomings of this business system.
2. The Product and Service
• Product or service your business will offer; include relevant history of the franchise product
or service;
• List the Unique Selling Point (USP) of your business product or service; the key feature
that makes your product stand out from the rest in the market place;
• How the product or service can be developed with the help of the franchisor.
3. The Personnel
• Include details of anyone who will be involved in making your business a success. These
people are a very important asset to your business success. Include in this section:
• Brief summary of each person’s skills and knowledge of the particular sector, including
their personal assessment of attributes, strengths, weaknesses as well as your own
assessment of each person;
• Relevant experience, commitment and reasons for involvement;
• Don’t forget to include yourself in this assessment of key personnel- you are the driving
force behind the business operation.
• Include a detailed CV for each person in the “Appendix” at the end of your plan.
4. The Market
• This is probably the most important section of the business plan. Without a clearly defined
market, your business will not succeed. If you can show that you have “done your
homework”, you will gain credibility for the whole business plan. Your franchisor will also
have research in this area you can avail of.
• Describe the current conditions in the market place for your product or service;
• Detail any relevant facts and figures relating to the market sector(s) that you will be
targeting, and the type(s) of potential customers for your product or service.
• Details of competitors should be included with reasons why potential customers will
choose your product/service over your competitors.
5. The Marketing Plan
• Include your marketing objectives; i.e. number of sales.
• Where your product or service will be positioned within the market place in terms of
image, price and quality. You can avail of franchisor assistance in determining the
marketing strategy.
• Planned marketing, PR campaigns and advertising;
• Customer service policy is planned and how it will work.
6. The Operation
• Include sources of supply, labor and materials;
• Detail resources required to operate your business; what you already have and what you
will need to acquire;
• Identify any crucial procedures or sensitive issues and outline possible solutions;
• State where you intend to operate from- your current premises and future requirements;
• Outline your projected Health and Safety policies.
7. The Premises
• Location;
• Future business growth;
• Running costs and Uniform Business Rates, rent, etc.
• Insurance
• Planning Consent, planning issues.
8. Financial Information
(a) Introduction: Start with the key facts; the forecast profit (or loss) for the year;
• Whether additional financing will be required and what for;
• Break even sales for the business should be calculated and shown as a % of your
anticipated sales;
• Details of the money you need to take out of the business to live on – required income.
(b) Profit and Loss Forecast
Your forecast profit (or loss) should be based on your anticipated sales, minus your direct costs and overheads. The assumptions made should include:
• Justify anticipated sales as best you can;
• Any direct costs (materials, etc) should be detailed;
• Don’t’ forget overheads;
(c) Cash Flow Forecast
To anticipate how much cash your business will require, you should convert your profit and loss forecast. List the following assumptions:
• When will you get the money from sales;
• When you will have to pay suppliers;
• The timing of specific overheads;
• How much capital equipment that you require for the business. Differentiate between
existing equipment and expenditure still to be made- how much and when.

9. The Appendix
This is the final section of the BP. It should include the detailed information mentioned earlier and the following:
• Details of premises;
• Insurance Details;
• Product brochure, photographs, letterhead.
• Anything else that you believe will enhance the credibility of you or enhance the credibility
of your business.
If you use these guidelines as your point of reference to guide you through creating your own business plan, you should have no problem in writing a successful Business Plan for your own personal use, or for approaching investors for your business, financial institutions and a franchisor.

AineMeadePhoto.jpgAine Meade is a Website Editor for Franchise Direct, a leading Internet franchise advertising portal. Aine creates high quality franchise information for its international websites in the U.S., and Europe. Aine has a BA (First) in English and History; MA in Literature & Publishing; Diploma in Media Journalism and a Diploma in Marketing.

Categories
Entrepreneurs

Top 10 Business Plan Myths of Solo Entrepreneurs

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Don’t let these stop you from having a business plan for success!

A recent study of 29,000 business startups noted that 26,000 of them failed. Of those failures, 67% had no written business plan. Think that’s a coincidence?

Here’s the top 10 myths Solo Entrepreneurs often have about business plans. Usually, the reasons why they don’t have one. De-bunk the myths, and see how having a business plan for your solo business, can actually be easy and fun–and can jumpstart your success!

1. Myth: I don’t need a business plan–it’s just me!

Starting a business without a plan is like taking a trip in a foreign country without a map. You might have a lot of fun along the way, and meet a lot of friends, but you are likely to end up at a very different place than you originally set out for?and you might have to phone home for funds for your return ticket.

Solo Entrepreneur Reality: Successful Solo Entrepreneurs know that the exercise of creating a business plan, really helps them think through all the critical aspects of running a business, make better business decisions, and get to profitability sooner.

2. Myth: I have to buy business plan software before I can start.

Business plan software comes in many shapes and sizes, and prices. Many are more geared at small and growing businesses with employees.

Solo Entrepreneur Reality: Business plan software can be helpful but it’s not required. Software is more likely to help if you have a more traditional type business, like a restaurant or a typical consulting business.

3. Myth: I need to hire a consultant to write my business plan.

Consultants are an expensive way to have your business plan written.

Solo Entrepreneur Reality: Your business IS you – and you need to be intimately involved with the creation of your business plan. A better strategy, if you think you need professional help, is to hire a coach or mentor – someone who can guide you in what you need to do, not do it for you.

4. Myth: The business plan templates I’ve seen have all these complex-sounding sections to them. I guess I need all those?

The only time you need to follow a specific outline is if you are looking for funding.

Solo Entrepreneur Reality: Your business plan needs to answer ten basic questions – that’s it! Don’t make things more complicated than necessary.

5. Myth: My business plan needs to be perfect before I can start my business.

If you wait for everything to be perfectly detailed, you may never start.

Solo Entrepreneur Reality: If you have at least a first draft that answers those ten basic questions, you are ready to launch your business! Make your business plan a living, evolving document. In the startup stages, review and update your plan every 2-3 months. As you grow and stabilize, you can slow down the review cycle to every 6-12 months. All business plans should be reviewed and updated at least once a year.

6. Myth: I have to do everything I say I’m going to do in my business plan, or I’m a failure.

Many Solo Entrepreneurs never start because of this myth which leaves them feeling that the success of their future business suddenly rides on each stroke of the pen or click of the keyboard!

Solo Entrepreneur Reality: Think of your business plan as a roadmap for a trip. Expect to take some detours for road construction. Be flexible enough to take some exciting, unplanned side trips. And don’t be surprised if instead of visiting Mount Rushmore, you decide to go to Yellowstone, if that turns out to meet your vacation goals better!

7. Myth: A good business plan has a nice cover, is at least 40 pages long, must be typed and double-spaced?

Business plans intended for investors, such as a bank or venture capitalist, must meet certain requirements that such investors expect.

Solo Entrepreneur Reality: As a Solo Entrepreneur, your business plan need only satisfy YOU. It might be scribbled on a napkin, on stickie notes on your wall, or consist of a collage of pictures and captions. It might be all in one document or scattered among several mediums. As long as you know it in your head and heart without having to look at it, and and it is easily accessible to you when you have doubts, that’s all that is necessary.

8. Myth: I don?t need a loan – so I don’t need a business plan.

YOU are the investor in your business – and would you invest in the stock of some company without seeing a prospectus?

Solo Entrepreneur Reality: Seeing your plan in black and white (or color, if you prefer!), can give a whole new view on the financial viability of your business. If ‘doing the numbers’ seems overwhelming, remember you don’t need fancy spreadsheets. Just lay out a budget that shows where all the money is coming from (and going), and have an accountant review it for additional perspective.

9. Myth: My business plan is in my head – that’s good enough.

I don?t know about you, but I sometimes can’t remember what I planned yesterday to do tomorrow, if I don’t write it down!

Solo Entrepreneur Reality: There is a real power in writing down your plans. Some schools of thought advocate that the act of writing a plan down triggers our subconscious to start working on how to manifest that plan. And, of course, it’s a lot easier to remember when you have it in front of you. And a lot easier to share and get feedback from your non-mind reading supporters.

10. Myth: Friends and family are the best sources of feedback and advice on my business plan.

If your brother is an accountant and your best friend is a market research expert, then this might be true.

Solo Entrepreneur Reality: As well meaning as our friends and family can often be, they just aren’t the best way to get honest, objective guidance. Instead, seek out folks that have specific knowledge that will help you, are willing to be candid with you, and that have a genuine interest in helping you succeed. A business coach is one resource to consider!