Why make a Business Plan for your Small Business?
Why do you need a business plan for your small business? A common mistake made by Entrepreneurs is not being prepared. They like to dive into the pool without testing out the water but what if the pool is freezing cold? Then you would regret diving in wouldn’t you? Having a business plan will not only prepare you in planning your small business, but will also serve the following purposes:
- Investors, loan officers and venture capitalists will need to look at your business plan to determine if they want to invest in your small business or offer you a small business loan.
- It will force you to set down some clear goals and marketing strategies for your small business
- Writing down the details can help you visualize all the aspects of your small business.
- It can be a tool in the future to measure if your small business performs higher or lower than expected.
Keep in mind that not all business plans are the same. Below is a basic business plan outline. Don’t rush through your business plan. It is not something that can be written on your lunch break. It requires research and thinking. If you feel that you need assistance forming a business plan for your small business read Help with Business Plan.
A Business Plan should include the following:
Cover Page– Indicate the name of your company, date, owner’s name, address and phone number.
Table of contents– this will inform the reader where items are located in your business plan.
Statement of Purpose– 1-2 paragraphs about the small business you plan to start and how much money you need to start it.
Executive Summary– A short summary of the business plan.
- Historical account of your business or business idea– What inspired your business idea. Did you notice a need in your community that was not being met?
- Goals and Objectives – Outline your short term (1 year) and long term (5 years) goals. Where do you see your business in the future? Don’t make unrealistic assumptions; for example don’t say you’ll be making millions in less than 3 months.
- Your products or services– Describe the products or services your business plans to sell. What is unique about your product or service?
- Location -location is a big factor in determining the success of a small business, so make sure to include your desired location. Include demographics and statistics. For example if you were starting a daycare you could look up statistics of how many kids between the ages of 1-11 are living in your area.
- Management/ ownership– The people in management positions are a critical factor to the success of your business. State your qualifications and experience in this field as well as those of your staff. Demonstrate that you have qualified, well knowledged and experienced people holding leadership positions in your business.
- Marketing Plan– Identify your prospective customers and how you plan to market your product or service. Is there a need for your product/ service that is not being met? Include trends in the market; also forcast the growth of trends in the future. Use graphs to organize this information.
- Competitive Analysis -Is there a lot of competition out there? What do you have that they don’t? Can you offer better quality or better prices? Why should potential customers choose you over the competition?
- Current and projected financial statements–
- Financial Statements– Plan out how much you expect to make in the future.
- Identify risks– Be honest. Lenders will appreciate your honesty and see your information as credible. Lenders know that every business faces risks. List all the potential problems your small business might face and how you plan to deal with those problems.
- Investments needed– Indicate to the lender how much money you need to start your business. Describe your plan on how you are going to use that money. Also state when you plan to pay back the lender and how much interest they should expect to earn from their investment.
- Appendix– In the appendix you can include any supporting information such as resumes (to show experience in the desired field), letters of recommendation and legal documents.
TIP: The content in your business plan is important but also is the presentation of it. Make sure to present your business plan in a neat, appealing, simple fashion. It should be typed, not hand written (even if you have very nice handwriting).
What is Small Business Market Research?….and why do you need it?
Small Business Market Research is the gathering of information and tests about the market for your small business. Market Research can help you determine if there is enough demand for your product and service. Market Research is used to discover the needs and wants of your potential and current customers. It can also be used to perform a SWOT analysis and to analyze your 4 P’s of marketing.
There are two types of market research; primary market research and secondary market research. Primary market research is more useful since you get to ask specific questions where in secondary market research you get more general information. Before conducting small business market research you need to determine what specific information you want to find out.
Conducting Small Business Market Research
Primary market research– Primary Market Research is first hand information from customers and potential customers. Primary market research is more expensive and time consuming to perform than secondary market research, however the information it offers can be much more specific and valuable.
- Market Research Surveys– Surveys by phone, mail or in person are used to assess the potential success of a product or service. Surveys are a highly used method of small business market research.
- Market Research Focus Groups– A Focus Group is a group of people (usually 6-10) who gather around to talk about a particular product, service, problems they have and more. A focus group can help you gain valuable insight about potential customers, by discovering their likes, dislikes and problems.
- Market Research Individual Interviews– Instead of conducting a group interview (focus group) you can also conduct individual interviews.
Secondary market research– Information someone else has gathered.
- Reports/ Studies(University studies)
- Local Newspapers and business magazines -many local newspapers and business related magazines offer demographic data.
- Library– In the reference section of the library you will find financial data and statistics. Ask your local librarian for help, they will be happy to assist you in finding the information you need. In the library among the references you will find studies by the U.S Department of Commerce and the U.S. Census Bureau.
- Government Agencies– Your local Bureau of Census publishes the “County and City Data Book” with offers local demographic information. Many state and local offices provide demographic information of the local area.
- Market Research Statistics– There are many websites online that offer statistics for small business market research. Statistics such as Demographics can help you get a sense of population characteristics of your location.
- Trade associations– there is a trade association for just about any industry. There is usually a fee to join but it is an opportunity to network with other professionals in the industry. You will also have access to market research they conducted.
Market Research while Running your Business
Don’t think that once you start your small business, you don’t have to conduct any more market research. Your small business should always be evolving and adapting to the changing markets. Here are some market research techniques to use while running your small business.
- Keep a sales report– Find out what products are hot and what products are not. Certain products may sell more in certain months. Inventory tracking software can help you notice trends.
- Competition– Pay attention to your competition. See what changes they are making. Have they made any changes in recent months or years? Have their products changed? Did they start offering new services? Your competitors may be making changes as a result of the changing market needs.
- Customer Survey– Perform customer surveys to discover what are the customer’s likes and dislikes and how you can improve your business. Be sure not to force customers to fill out a survey. Be sure they know it is optional. You can have a customer suggestion box where customers write their suggestions and put it in the box. You can also find out where your customers are coming from by asking for their zip code when they are about to pay. You may discover that a large percentage of your customers come from a certain area.
- Keep a Caller ID– Find out where your customers are calling from. You may discover that a large concentration of your customers are in a certain area and it may not necessarily be in your area of business. You can then experiment with advertising in those areas.
Small Business Market Research can be an expensive and time consuming task depending on the methods of market research you choose however the information you obtain from it can be very valuable to your business. You can decide to hire a market research firm or do your own market research. If you decide to do it your self you can consider taking a Market Research Class in a local college. This class will help you attain some knowledge of using different market research techniques to effectively collect data.
Small Business Marketing is the process of selling products or services to customers usually through advertising efforts. A good business marketing strategy devises a method of effectively communicating to potential and present customers why they should choose your business. Marketing your small business is essential to it’s success so it is a good idea to develop a Small Business Marketing Plan. You can also consider getting help from marketing experts who have extensive knowledge in this field and can offer you valuable marketing strategies. Below are some tips and marketing strategies for medium and small businesses.
1.)Target Market– The first step in developing a small business marketing strategy is to select your target market. Specifying who you are selling to can help you develop more effective advertising campaigns.
2.)Conduct Market Research– By conducting market research you can discover what potential customers are looking for in your type of business and then use this information to develop an advertising campaign that will attract them. For example if through market research you discover that the main motivator in consumers are low prices, you can use this to appeal to them. You should be aware of your potential customers and their wants and needs. Is there a demand for a product that is not being met? Is there a lot of competition? Know your market environment. Marketing a product or service that nobody wants is a sure way to small business failure. Many entrepreneurs make the mistake of assuming they know what customers want and only discover their mistake when their small business fails to produce profits. Back up your assumptions with facts and market research. Just because you love those presidential bobble heads doesn’t mean your customers will.
3.)Analyze your competition– Perform a competitive analysis and find out all you can about your competition. How are they promoting their business? What are their strengths and weaknesses? Through your competition you can get good ideas on how to advertise your small business.
4.)Your unique business spin– Your small business should have its unique spin that makes it stand out from the competition. Sell why your product or service is better. Does it offer something different from your competitors? It might be faster service, better quality, lower prices. Will customers appreciate this difference? You may think you know what customers want but you don’t. You may be surprised to find out that lower prices are not always a customer’s priority. Market Research can help you gain valuable information about what potential customers are really seeking in your business.
5.)Communicate through a single statement– Communicate the “unique spin” of your small business idea through a single statement. This statement can be your small business slogan. Make sure this unique spin is something your target market wants. For example Maria runs a house cleaning service in NYC. Her target market are wealthy New Yorkers who don’t have time to clean. After conducting market research she finds out a majority of her potential customers are seeking 1. Good quality cleaning and 2. Cheap prices. She decides to make her slogan, “Luxury cleaning without the luxury prices.” Maria uses this phrase on all her advertising efforts. The public will repeatedly see this phrase and associate it with Maria’s cleaning business. The phrase is simple, straight to the point and conveys the unique spin.
6.)Consistency– Using a consistent statement and brand for your small business marketing will better utilize your past and current advertising efforts. You want past customers to remember you and return, and new potential customers to give you a try.
7.)Test various small business advertising methods– Try various advertising methods and find out which method of advertising is more effective for your small business. This will save money in the long run because you will only be spending money on the most effective forms of advertising. For example you may want to hand out flyers, develop a small business website, try yellow book ads, billboards, newspaper ads, radio ads and more. Find a way to keep track of how customers find your small business. Find new ways to effectively reach your target market. Test conventional as well as non-conventional ways of advertising. Be sure to avoid illegal advertising methods.
Getting the required small business license and permits for your small business is a necessary step to ensure you are abiding by the laws. Most businesses whether big or small needs some kind of business license or permit to run thier business legally. Once you have chosen your form of business ownership you can then find out what business license and permits you need to legally operate your small business. Every business is different so the license and permits necessary for your business will vary depending on your location and what you are selling. You can find out what small business license and permits you need to run your business by calling your local and state government offices in the area of your business. You can also consider consulting with a lawyer to ensure your business is in compliance with local and state laws and that you have all your necessary paperwork.
Below you will find a list of state websites. You can look in your state’s website for more information on the procedure of getting a small business license. In the search box of your state’s site enter the term “business license”. If your search does not bring you any relevent results look for thier contact phone number and contact them to discover what business license and permits you need to run your small business. You can also conduct a search on a search engine for the term- “business license in Your State“.
If any of these links are not working please contact me and let me know so I can update it.
It is a good idea to protect your business with small business insurance. You have invested much of your time and money into your small business but what would happen if there was a fire and all your equipment burst into flames? What if one of your employees gets hurt on your property and decides to sue you? Having insurance can ensure your small business doesn’t fall apart as a result of situations like these. Below you will find an overview of different types of small business insurance.
Types of Small Business Insurance
- Small business property insurance– In case anything should happen to your small business equipment, office furniture or property due to certain uncontrollable circumstances such as theft or fire.
- Workers compensation insurance– If you have employees this insurance is mandatory for you to have.
- Liability Insurance– Should a customer, employee or visitor be harmed or hurt on your property , this insurance will cover it. There are different types of Liability Insurance you can choose from as well.
- Product liability insurance– In case a product manufactured by your business causes injury or death.
- Professional liability insurance– If you provide a service rather than a product this insurance can protect you from personal claims made against your services.
- Employment practices liability insurance– If an employee decides to sue you for sexual harassment, or wrongful termination, this insurance will cover it.
- Business Vehicle Insurance– You probably know the importance of having car insurance for your car, so it is equally important to have car insurance for your business vehicle. In fact in many states all cars are required to have car insurance.
- Health Insurance– You can choose to get health insurance for you and your employees. Costs of medical bills and medication are extremely high, so having health insurance in your business can prevent employees as well as yourself from having to worry about how to pay for it.
There is no “one size fits all” when it comes to choosing business insurance. Every small business is different and therefore requires their own specific alterations. Speaking to a Small Business Insurance Agent can help you figure out which types of coverage will best fit the needs of your small business. Take their recommendations seriously; don’t underestimate the chances of an accident or unexpected event happening to you. Prepare for the worst, but hope for the best. Make sure to shop around. Get quotes from several different companies to discover the best price.