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A Business Plan is Crucial to Your Success
What niche does your product fit? How much does it cost to manufacture and how much can you sell it for? What other products are you competing with? How many employees will you have? Discover why you don’t want to start a small business without answering these questions and more in a business plan.
What niche does your product fit? How much does it cost to manufacture and how much can you sell it for? What other products are you competing with? How many employees will you have, and how much will you pay them? These are just some of the questions that should be answered in your business plan, a crucial document for the success of any small business.
A business plan outlines what you think you know about every possible facet of your business, and it’s important for a variety of reasons. A business plan can be an early indication that you’re not actually prepared to start a business. Small business advocates provide tough love to prospective small business owners, and business plans do the same.
Out of a group of five people interested in starting a business, two of them will often be dissuaded after looking at the facts. If everyone went through that process, the notoriously high failure rate of small businesses — about 50 percent over four years — would fall dramatically.
Unfortunately, most people don’t spend the time they should on this part of the process. While going through a business plan template such as the one on Bplans , not being able to answer some of the basic questions ought to be a red flag that you shouldn’t move forward until you have those pieces of the puzzle in place. Going through a business plan also leads many people to realize that they’re not ready quite yet to quit their job and give up a steady salary and benefits, or they’re not ready to put their life savings on the line for a risky venture.
Going forward, a business plan helps you stay focused and makes sure you’re addressing some key areas. For example, many small business owners don’t have an adequate understanding of cash and accounting, and get upside down on payables and receivables. Cash flow problems can quickly kill a small business. Having capital needs outlined in the business plan gives you the confidence to move forward, knowing that you have the necessary capital to sustain operations.
Creating a business plan is also a good way to start getting familiar with the operations side of the business. Most people who start a small business are familiar with their industry. A chef may be an aspiring restaurateur or a hairdresser might want to start a salon. They know all about cooking or cutting hair, but they probably don’t know how to keep books, create a cash flow statement or get all of the proper permits they require. This is the operational side of the business, and small business owners have to be prepared to wear both hats for a long time (possibly forever) and switch between them frequently. Going through the process of creating a business plan offers a good taste of that world, and also gives you an idea of what needs to be addressed, such as finding space and equipment for a restaurant or getting the proper licensing from the health department.
A business plan should also help you prepare for growth. If you set a growth target for the second year of operations, you can calculate how much extra capital you’ll need to have on hand to sustain that growth, so you won’t run the risk of succeeding yourself out of business by growing without adequate cash on hand. A solid business plan also makes it much easier to get loans from banks or attract an investor. While a business plan isn’t all you need for a successful and smart business, it does provide a great start.