by Victoria Duff
I love to annoy my entrepreneur clients about how to conduct a proper business. I do this because I have broken all the rules myself. Amazingly, I have managed to live through problems created by procrastination and complacency. Yes, it is true that I have feet of clay just like everyone else.
From the very second you get a bright idea that you think will be a great business, you have created a demanding addition to your life. When you hear people refer to their businesses as “My Baby” take that as an indication of what it is like to own and operate a business. A business must be fed and cajoled and watched and rescued and organized and … well, raised just like a child. That is why you should take it seriously right from the start because if you neglect the not-so-fun parts, you will end up with problems.
Before the Business Plan
The best thing you can do for your own sanity and the future success of your business idea is to sit down and actually put your idea in writing. Don’t make the mistake of thinking you can keep it all in your head, because that only fools you into thinking you have everything under control. The only way to find out where the holes are in your idea is to go through the full exercise of writing it down on paper.
Start by listing the Strengths, Weaknesses, Opportunities, and Threats associated with putting your idea into practice. This is a SWOT analysis, and it is explained in last month’s column. This will help you get your thinking organized so you can move to the next stage of planning your business.
What is a Business Plan?
Think of a business plan as a roadmap. Your business will be a journey, so you will need to know where you are going. Here are some questions for you to answer in your business plan:
- What is the business going to do? Are you going to operate a service or sell a product?
- Who will be your customers? Where are they and how can you communicate with them? What is important to them about your service or product? What can they afford to pay?
- How will you produce and sell your product or service? Will you have vendors? Employees? Will you sell from your property or office? Will you need storage? Equipment? What does your daily operation require to result in a saleable product or service?
- How will you market your product or service? Will you establish a store or a booth at a local farmers’ market? Will you sell on Amazon? Do you have a website and is it visible in the search engines? Will you advertise? Will you hold events like pick-your-pumpkin weekends or strawberry festivals?
- How much will you spend and how much will you make? This is the most important part of your planning. If you don’t budget your expenses, you might run out of money before you can sell anything. Also, you must be able to sell your product for more than it costs to create or you will lose money and go out of business.
Figuring your Financials
Don’t guess at your expenses! Control your expenses, or you won’t make a profit, and you will have to close your business. List your fixed expenses such as utilities, loans, employees, supplies, etc. Next list the expenses involved in creating and selling your product, such as packaging, advertising, fulfillment. Once you have a firm idea of how much it will cost to produce what you want to sell, figure out how much you can get away with charging. Do some market research to find out how much others are charging for similar products. How much will you have to sell each month to pay for production? How much will you have to sell to make a profit?
The Depressing Part
We often have to go back and cut some expenses in order to make enough money for the business to be worthwhile. You also might have to come up with a different product. This is why you need to seriously plan your business before you try to put it into operation. But don’t give up! Think of it as a puzzle. Cut a few expenses, change a few assumptions, and pretty soon you will come upon a scheme that works. Just keep working on the plan until you reach a satisfactory result.