First thing you do is write a business plan. Learn more. Then the second thing you do is write a business plan. Yes it is painful but you have to write a business plan. You cannot get a loan, venture capital financing or know where you are going or if you are getting there without a plan.
Starting a business takes a lot of work. You need to understand what you are providing, how you going to measure you success, what is the financial return, what is the break-even point. The business plan provides a lot of these answers. If you don’t like the answers, then you probably ought to stop and come up with some other idea.
Ernest Young had an outline that I like to use when I evaluate ideas and potential businesses. There is a PDF located here.
The first thing to tackle is the financials. Lets face it, the purpose of the business is make money and you need to know how long it will take to break even. If you cannot live on water and bread until that point then maybe you should find investors, but I get ahead of myself.
Financials need to be there and they need to be realistic. You can look up online for key ratios for the industry. This is important to double check that your numbers are real world. If profit margins are high or cost of doing business is too low, it is likely you didn’t do your homework or you are not being realistic in your financial statements.
Products. What is your product? What business are you in? More importantly what business are you not in? Figure out who your customers are and how are they are grouped. Each group may have a different need for your product. Each group will likely have a different marketing message. Which group are you going after? Don’t say all of them, that is not realistic.
Who is your competition? Why are you different? Why would someone switch from your competitor and use you? You may want to read Purple Cow by Seth Godin. It is good book for differentiating yourself from everyone else.
Still want to go into business? Still viable? Great! How is your company going to be run? What is the operational plan? How are you going to run the business? Who is doing what? What are they responsible for? I recommend reading E-Myth Revisited by Michael Gerber. Excellent book to help you define your organization so you can work on the business instead working in the business.
Need help with the business plan? There are plenty of professional services likely in your area that can help. The Small Business Association can point you to SCORE that helps entrepreneurs put a plan together.
So you still like the plan but you need financing? Well the Small Business Association is a good place to start. There is also likely an “Angel” investment group that meets monthly that listen to people with business plans to attract early investors. Understand this group of early investors wants to make 5 – 10X their money. If your plan realistically is not going to generate that type of return, then don’t waste your time. Same goes with Venture Capitalists. They finance 1 in 1000 buiness plans and they are looking of a high rate of return on their money.
Other options is go the slow and steady route if that is possible. Instead of starting out with a large organization or retail space or server farm, can you do it cheap? Start small and validate the market? Can you do it without quitting your day job? This is usually the best and safest way to enter a market. Some of the biggest companies started small and cheap. Home Depot is a perfect example. Know why the sign is orange? Because they couldn’t afford a lighted sign so they made one out of plywood and used florescent orange paint to attract attention.
A business plan is a living document. During initial development of plan you may rewrite or refine the plan a dozen times. Once the business has started you will likely need to update or change the plan often. Any changes in business plan must be communicated to the employees so that everyone in the company is moving in the same direction. It does no good to make a plan and not communicate it to the employees. Nothing will happen in that scenario. Management by wishful thinking is not a viable business planning.
One thing I cannot stress enough is please do not go into business without a business plan. Too many good companies fell apart because they failed to plan who they are and where they are going. Too many company have failed because nobody knew how much money was needed to get to the break even point. These questions cannot be answerd without a business plan.
