The Importance of Having a Good Business Plan

Like many would-be entrepreneurs, I didn't have a clue about business plans when I first started seriously considering starting my own venture. At best, I threw together a rough plan on a few sheets of paper, outlining costs and projected revenues. I wouldn't call it a plan, however, since it really didn't have any flow to it and was probably not decipherable by anyone except myself. At best, it was a bunch of random thoughts scribbled down on paper. Amazingly enough, I thought that this flimsy plan would be enough to secure a bank loan. I assumed that most of the questions they would ask, I could simply answer off the top of my head. Needless to say, I didn't get the loan.

Years later, I was fortunate enough to be able to really appreciate the value of a well-thought-out business plan. A good business plan lays things out systematically and forces you to look at serious questions such as startup costs, operating revenues, projected sales, and future growth. You definitely don't want to guess at this. By having your costs written down in a solid plan, you can confidently decide on what you're going to charge for your product or services.

Here's a quick business plan that also contains information about your major competitors. It would be a huge mistake to forget about who you're competing against. They should be part of your business plan and you should definitely know everything you can about them.

Remember, most businesses fail through lack of a solid business plan. Yes, it's time-consuming to draw one up, but it's an absolute necessity. Even if you've been in business for some time and are experiencing a little success, don't think that a good business plan can't help you. In fact, it should be revisited on an ongoing basis even once the initial startup phase is over.

Here's the plan:

1. Describe your business in one or two sentences. If you can't do this, you need to revisit and rethink your entire focus and ultimate goal.

2. Is there a demand for your product or services? Why do you believe this is so?

3. In one year, where do you think your business will be? How about three years? How about five years? Be as detailed as possible.

4. What will you use for startup capital? Will you tap into your savings? Use your credit line or credit cards? Will you rely on a bank loan?

5. How about your expenses? What big-ticket items are you going to need? Where will your money be needed the most? What will the cost be?

6. Will you need memberships in any trade organizations or publications? What will the cost be?

7. Can you describe your target customer? Who is he/she, what do they need, and why should they buy from you?

8. Who are your competitors? What advantages do they have – what advantages do you have?

9. How well are you differentiating yourself from your competitors? Be specific and include things like price, services, and quality.

10. Where will you set up shop? Will you designate an area of your home, or will you opt for a commercial location? How much will each cost?

11. How about non-direct costs such as daycare?

12. How much money do you need to survive? This includes all the money you're going to need to pay your bills and survive.

While this is only a partial list of questions you need to ask yourself when creating your business plan, it should be enough to get you thinking about the detail involved and the hard questions you need to ask yourself before committing to your new venture.

Starting a Small Business? Here Are Some Questions You Need to Ask Yourself

For many people, the lure of business ownership can be very strong. Imagine, not having to commute, being your own boss, and having the complete freedom to be able to plan your day and make your own decisions as you see fit.

However, starting your own business is a serious thing, and it's really something that you must think through. Part of this involves asking yourself certain key questions like:

1. If you start your business part-time while keeping your full-time job, how will you find time to devote enough hours to your business? How many hours a day are you going to be able to realistically put in? You're going to have to decide whether you are going to work mornings or evenings, then set up a schedule to follow. Additionally, you're going to have to decide whether you're going to work weekends. If you're holding down a full-time job, there's a good chance that your new enterprise is going to require that you work seven days a week.

2. Where, exactly, are you going to set up your business? Will you designate an area of your bedroom, basement, or garage? And once you find a place where you can be productive and uninterrupted, will there be any negative effects on your neighbors (such as customers coming to the door, parking on the street, and delivery trucks snarling traffic)?

3. Are you willing to put in time and money for your education? Not many businesses start off profitable. It takes time to learn the ropes and find your groove. Do you have enough money to keep you going while you're still finding your legs?

4. What are your marketing plans? Exactly, how are you going to get customers in front of your product or service? Do you have any natural sales ability? What marketing techniques are you going to use to get your name out there?

5. And, lastly; how do you plan on financing your new venture? How much money do you require? How much cash you have on hand? Are you able to borrow from friends or family? Do you have a business plan in order to apply for financing from a bank? What's your credit rating like?

These are all very important questions that you must address before you even think of hanging out your shingle. A good percentage of businesses go under because of poor financial planning on the owner's part. You must be ready for all possibilities and plan accordingly.