The new year is here. Many aspiring entrepreneurs are planning to start a business in 2018. Some would like a brick-and-mortar business while others would prefer an online business. More and more would-be businessmen are considering e-commerce particularly the dropshipping kind.
There is nothing like having your own business. The challenge, excitement, risk-taking, and financial rewards are fascinating. On the other hand, the unseen problems, miscalculations, hardships, stress, and business failures may have far-reaching personal and financial adverse consequences.
To have a better chance at succeeding in your new business (or even expanding an existing one), you must write a business plan. It may not be a formal business plan as long as it is a plan about your business and it should be in writing so you can go back to it later after you shall have launched your business.
Business plans come in different degrees of complexity depending on what audience it is intended for – business owners/stockholders, prospective investors, lenders, or government agencies.
However, the best business plan is one that is simple, well-researched, and includes the most important factors for business success.
Critical components of a business plan
Know your target market whether it is in the B2C or B2B sector. Conduct a thorough market research. Learn as much as you can about the demographic, psychographic, and competitive situation of your market. Establish a clear profile of your target customer. Create your buyer persona.
Studying thoroughly how you can best serve the needs of your potential customers and knowing the strengths and weaknesses of your competitors, you can establish your unique value proposition that can give you a competitive advantage and, therefore, a good chance of survival and eventual business success.
It is important that you have a minimum viable product and establish a product-market fit. Make sure your product meets (or even exceeds) the expectations of your potential customers.
It is crucial for you to draw up and test the effectiveness of a repeatable customer acquisition process. Having a good market and product will lead to nowhere if you cannot grow a profitable customer base.
You should have a clear grasp of how much money you need to start and sustain your business. You should know the details of your startup costs and your cash flow during the initial stage of your operation. You should be able to clearly follow the money flow, how you create value for your customers, and how you generate profit to support business growth.
Generally, you should be able to have available cash for pre-operating expenses, to launch your business, and to continue operating at least for the first three years. This is where a cash flow projection becomes critical – knowing your fund sources, your cash expenditures, and making sure there is enough cash left for the next operating cycle.
You should also be able to determine how much sales you can realistically generate per cycle, your cost of producing your product/service (like material and labor inputs in production), your operating expenses (like marketing, sales, and administrative expenses), and how much profit (or loss) you will realize. You put all these financial data into your profit and loss projection.
It is also crucial to consider who will be in-charge of running the day-to-day operation of the business. Normally, the founder/owner will manage it. However, a business will need professional expertise in marketing, sales, production, finance, and administration. It is advisable for the founder/owner to get somebody, probably as a business partner, who has the expertise that can complement his/her skills and experience.
It is never too late to start your own business. But do it right the first time around as it will save you a lot of money, time, and headaches. Write a simple and short (even one page) business plan. You may request here for a free outline of a one-page business plan.