Many entrepreneurs dream of leaving the corporate grind and starting their own business. But most small business fail before they reach their first anniversary because their owners haven’t clearly defined and executed a small business plan. A small business plan is the foundation of a small business; it dictates what the business does, who its customers are, how it reaches those customers, and its short- and long-term strategies for growth.
Without a small business plan, a small business is nothing but a product idea — and there’s nothing unique about a product idea. Every successful small business has a well-documented and thorough business plan.
Getting Started with a Small Business Plan – Product Definition
The first step in crafting a small business plan is deciding what, exactly, your business plans on doing. This could be a service or a product — whatever it is, it is the cornerstone of your enterprise and needs to be well defined. What need is it satisfying? How will it be produced if it is a product or administered if it is a service? What is your core demographic? These are fundamental issues that every U.S. business needs to address and is called product definition.
Many entrepreneurs think that they can go into business with a very vague product definition and flesh out the details based on what their customers want, but this is flawed logic. You need a very clear understanding of what your customers want before going into business. If a business begins its venture with the attitude that it will catch up to consumer demand at a later point in time, it is already behind the curve. A business should begin because its product definition is ahead of the curve. That is the result of proper business planning.
Who are your Customers
This is a very significant question, and it will determine many things about your products. Are they rich? Do they spend money frivolously? Are they young and hip? Old? In college? Do they shop online? The answers to these questions determine not only how you craft your product but how you market it. If your customers are in college, depending solely on radio marketing is a bad idea.
Decide who your customer is going to appeal to. A business plan needs to be aware of its demographic — the people whose needs it is trying to satisfy. Astute business planning involves identifying your customers’ needs, and you can’t do that without first identifying your customers. Decide how you will market your product
A business plan needs a very detailed plan for marketing the business’ product. Marketing, especially in the very early stages of a business, is crucial; without word of mouth, a business can only depend on its marketing efforts to promote sales.
Online marketing offers small businesses a very simple, cheap, and fast way of reaching new customers. Online marketing has become a cornerstone of U.S. business, and most business development is now handled online. Your business plan should address how exactly your business plans to create and continuously expand its online presence.
Creating a Budget for a small business
An important rule of thumb to remember when creating a budget in your business plan is that most budgets are inaccurate.
A small business will generally overestimate its income and underestimate its expenses, especially in the first few months of its operations when they first set out creating a budget. This is normal and should be expected, but your business plan should be flexible enough to accommodate change.
Don’t forecast your business plan out too far into the future, and don’t make serious bets on your business plan completely reflecting reality. A business plan is an outline of what you want to accomplish, not a set of rules for accomplishing it. Allow for some buffer in your budget and understand that sales and expenses will be volatile for your business’ first few months. A U.S. business faces an environment of uncertainty from the first day it opens its doors. Successful businesses react and adjust to that uncertainty.