Vital Steps
Roughly 500,000 businesses open in the US each year. For anyone starting a small business, the process can be especially daunting. Not every entrepreneur has a business or accounting degree. And even those who do might feel overwhelmed with all of the planning necessary for a startup.
KTM was started by a seasoned engineer new to running his own company. With the steep learning curve, Paul found that establishing a business plan was essential for the business’s success. Based on his experience, below are points that any new business owner should include in a new business plan.
Purpose of Business
If you’re planning to start a business, of course you’ll need to establish a description of your business—that is, what do you do? The product or service that you plan to offer is likely the area of interest that prompted you to start a business in the first place, and your business plan should outline exactly what it is you plan to offer.
But beyond that, you’ll also need to pin down your business’s raison d’etre and your business proposition—Aside from providing your and your employees’ livelihood, why does your business exist—what need are you meeting? If other similar products or services are available, there must be something unique about what you plan to offer: a new approach, a niche interest that no one else is catering to yet, a way to make whatever you’re offering more readily available or accessible to customers.
Market
And that leads us to the next vital part of a business plan: defining your market parameters. Who is it that you’re hoping to reach? It’s difficult to overstate the importance of determining your target demographic as specifically as possible. Casting too wide a net leads to wasted ad spending and excessive time spent trying to get in touch with people who aren’t likely to be interested in what you’re offering.
In assessing customer base, Paul offered this example: “If your customer base is manufacturing companies that require high precision machining operations, there is no need to market to retail or professional service providers.” Putting your efforts toward people who can most use your services will spare your resources and, hopefully, get you a better return on your customer spend.
As you asses your market, you’ll also need to assess your competition. Who else is trying to reach your market? What can they offer that might lead a customer out your door and through theirs? Answering these questions requires on honest evaluation of your strengths and weaknesses, as well as your competitors’. The more honest you are with yourself about where you could improve and where your competitors are offering stellar service, the better you’ll be able to figure out how you can keep—and grow—your market.
Finances
As strong as you might be on the first two points, none of these ideas can take off without a solid financial plan. First you’ll need to document your financial projections. This isn’t an easy step, but with solid advisors around you, you can set up a project profit & loss statement and plan how you will generate revenue, what costs you’ll incur, and how you should price your products or services accordingly.
Another important step is to build a risk analysis. As with assessing your company’s market weaknesses, you need to evaluate what could go wrong financially. What will you do if these financial concerns come to fruition? Once you determine what the risks are, you can prepare for them. No one can account for every possible pitfall. But as other concerns arise, you can add them to your plan and go from there. Over time, you’ll have documented and prepared to respond to numerous difficulties.
Once you have an idea of how you’ll generate revenue and prepare for financial risks, you can lay out your capital spending plan. Here you’ll determine the investment you need to get your business going and consider where you will acquire funding. Look at where and when you’ll receive funding and compare that information to your financial projections. Then you can make careful spending decisions.
Conclusion
Starting a business is never easy—and the risks are great. But for those companies that can make it, those business owners with the fortunate combination of hard work and timely support, the joy of forming a steady company from scratch is a rich reward.