Consider who your clientele will be. Don’t just say, everyone. Identifying your ideal clientele will help you ask deeper, more important questions. Make sure you do some serious research into the following questions.
- Demand: Does demand for your business already exist, or will it need to be created?
- Market size: How many potential people will be interested in your product?
- Economic indicators: What is the income range and employment rate?
- Location: What’s the geographic reach of your company?
- Market saturation: What’s the current market saturation?
- Pricing: What are people currently paying for similar alternatives?
- Competitive Analysis Who are the existing businesses in your specific market? What are their strengths and weaknesses? What makes your business stand out from your competition? Do you offer more competitive pricing? Do you have a higher quality product? This is important to determine because it will help you narrow in on your own clientele.
Avoid these Common Business Killing Mistakes new business owners often make.
You might have all the ideas of a business plan floating around in your head, but putting them down on paper is crucial. Do not skip this step. You do this even though you know it may need to change or be rewritten. Business plans often must be adapted. But you do not go to battle without a plan. Good business plans set goals you can keep your eye on when you’re struggling. They define timelines for important bench marks like, when should you be profitable? Good business plans help you predict and plan for risks and obstacles that may arise. They also help investors see the viability of a company.
The basic components of a good business plan include:
- Executive Summary: Brief description of your product or service and why it will work.
- Company Description: What are your biggest strengths and assets as a company. What problems does your business solve? Is there an unmet demand for your services? Are there specific details about your plan or team that will allow you to outperform your competition.
- Market Analysis: Layout what you see and your research revealed about the future of your industry and your industry’s market.
- Organization and Management: Define your business’ legal structure and the organizational structure. How will your company be managed?
- Service or Product Line: Describe your product/service. What is it that separates your product or service from your competition.
- Marketing and Sales: Your marketing strategy is going to change over time, but you can still make some goals. Describe what making a sale or closing a deal means.
- Funding Request: What resources will you require and from where will you get those funds. Describe exactly how the funds will be utilized in your business and how long those assets will take to pay off.
The first financial aspect to consider is, do you have enough savings to make it until your business turns a profit? It takes a while. It’s often a smart idea to hold on to your day a job or a part-time job while you build the foundation of your business. This way, if it takes longer than expected, you have a cushion.
The break-even analysis
At what point does your business break even? Determine this number and say it over and over to yourself until you see it in your dreams:
Fixed Costs ÷ (Average Price – Variable Costs) = Break-Even Point
There are two different ways you can think about using this:
- You have a set price and you want to figure out how many units you’ll need to sell to cover your costs.
- You need to turn a profit by a set amount of units and you use the formula to determine your unit price.
Watch your expenses. Look, we all like nice things, and the old adage is true, you get what you pay for, but keep in mind, many a business has gone under due to overspending too early. There is an art to riding this line. Maybe you don’t need that giant office space or the top-of-the-line piece of equipment. As a small business, you want to turn a profit quickly and avoid drowning in debt.
Consider your funding options. Startup capital for your business can come from various means. The best way to acquire funding for your business depends on several factors, including creditworthiness, the amount needed and available options.
Small business loan. It’s very common for people interested in starting a new business to inquire about a small business loan. It’s funny that this term is so widely known, because actually securing an uncollateralized business loan is very rare. For most small business entrepreneurs, this is not really an option.
Business grants. A grant is better than a loan, because you don’t have to pay it back (assuming you fulfill the terms of the grant). There are government and private grants available for small businesses. Grants for small businesses are similar to scholarships in that they are many and varied and finding a good one is hard but can change your life. Check grants.gov for federal grants. The key to landing a business grant is finding one that pertains to your exact situation.
Investors. It’s possible an investor could find your business interesting enough that they’d like to be part of it. In exchange, an investor will likely want to own a percentage of your business or receive a princely fixed rate of return.
Crowdfunding. Lots of small businesses have gotten their startup costs covered this way in recent years. Try GoFundme or SeedInvest.