Business Tip: Starting your own business by planning
By Lindsay Young
So often people want to start their own business but aren't sure how to begin.
Do you wake up and decide one day that you are going to start a retail store, restaurant or laundromat?
It's likely that your business idea is something you've been thinking about and planning, on some level, for quite a while. There's an expected level of risk involved in starting your own business, therefore, you want to be as prepared as possible.
Understand that there are two main reasons for small business failures: lack of planning and lack of sufficient capital.
To assist in warding off failure, consider drafting a business plan. Do note that a business plan will likely be a required document if you plan to obtain a business loan. A banker wants to see how much risk is involved for their institution.
The plan details your goals as an owner and the steps you will take to achieve those goals.
To explain a business plan simply: Just as songwriters write verses to build a song, and poets write stanzas to build a poem, entrepreneurs write business plans to build a business.
A proper business plan should answer three questions: 1. Where are you now? 2. Where are you going? and 3. How will you get there?
Additionally, keep in mind that you not only have a business life and goals, but also a personal and family life and goals. Each compartment of your life should align to ensure success in your venture.
A typical business plan will have the following sections: executive summary, business description, industry analysis, management and organization outline, marketing plan, financial plan and lastly, any appendices or attachments necessary.
The executive summary encompasses the entire plan. It is suggested that this is completed last.
The business description is the history of your business, a mission statement, goals, objectives and a high overview of financial needs.
Industry analysis explains the trends, forecasts and opportunities of the industry your business is a part of.
Management and organization includes an explanation of the legal structure of the business, ownership responsibility and qualifications and management personnel and duties.
A marketing plan will explain planned growth, an analysis of the market and strategies to enter and grow in the market.
The financial plan is likely to be one of the most important sections of a business plan, especially from a banker's perspective. Here you make educated assumptions regarding the financial stability of your business. This section should include pro forma statements, three years of cash flow projections and loan request information (source, use and collateral of funds).
Each section is as important as the next and together, essentially tells a story.
Understand that a solid business plan may take several months to perfect. At the same time, understand that a solid business plan can prevent having a lack of planning, which is a main reason for small business failure.
Lisa Barr is a business adviser at the University of Houston-Victoria Small Business Development Corporation. For more information, contact the UHV-Small Business Development Center at 361-485-4485.