3 Important Plans You'll Need to Start a Small Business
For some, the decision to start a business is one that takes years of research and thoughtful consideration. For others, it happens quickly — an idea takes root and you're building the foundation for your new business within days. Whether your process is fast and furious or slow and steady, a number of steps are necessary to start a business.
Each step in the business startup process is important, but there is one phase you simply cannot skip: the planning phase. You'll have to focus on three essential plans to do it right and give your small business the best chance at survival. These plans are relevant for every type of small business: the business plan, the marketing plan, and the financial plan. Although each is best created as a separate document, all three overlap in some areas and they should work in concert.
Here's a rundown of these three plans and how they will help you make progress in starting your new business. It's best to start with your business plan, then move onto your marketing plan. Leave your financial plan for last because you'll need to know the details about how you'll launch and promote your business before you can estimate the capital you'll need to meet your goals.
A Business Plan
Do you break out in a sweat when you hear the phrase "business plan" because all you can think about is how difficult it must be to create a 40-page document that covers every single intricacy of your business idea? Maybe you aren't even convinced that you need a business plan at all.
Well, I have good news and bad news. First, the bad news: You really do need a business plan. There's just no getting around it. But here's the good news: Your business plan doesn't have to be a massively long and boring document that you painstakingly create and then never look at again. A functional business plan is really a working document that can take many forms and act more as a flexible action-planning tool than a structured concrete document.
At a minimum, you'll need a streamlined business plan that focuses on:
- Vision: What are you creating?
- Mission Statement: What is the purpose of your business?
- Objectives: What are your business goals?
- Strategies: How, what, and where?
- Startup Capital: How much do you need to launch?
- Expenses: What will it cost monthly to keep your business running?
- Projected Income: What do you expect to earn? Back this up with research!
This working business plan may be the beginning of a more traditional business plan that you use to pitch investors or to apply for loans. Then again, it may be all you need to outline where you are right now, determine where you want to go, and create a plan to get from Point A to Point B. By focusing only on the essential items listed above, you can get down to figuring out your business much more productively.
A Marketing Plan
Now that you have your business plan in hand and guiding your progress, you'll need a marketing plan that will help you attract your customers and begin to create a revenue stream. You may have more than one marketing plan. You can create one to promote your business, one to introduce new products or services to your market, another to target new niche markets, and one that develops new ways to reach and attract customers. But for start-up proposes, we'll focus on your initial marketing plan, the one you'll use to promote your new business.
Your start-up marketing plan should include:
- Strategies: What do you want your marketing plan to do for your business?
- Mission Statement: What is the purpose of your business? This is the same mission you included in your business plan.
- Target Market: Who is your ideal customer?
- Competitive Analysis: Who are your competitors?
- Unique Selling Proposition: What makes your business unique?
- Pricing: What will you charge for your products and services?
- Promotional Plan: How will you reach your target market?
- Marketing Budget: How much money will you spend, and on what?
- Metrics: How will you track the success of your marketing activities?
The last step is often overlooked but it is extremely important. Take time to think through the details of how you'll track the success or failure of the various marketing tactics you use so you can make wiser decisions with each marketing campaign you launch.
You'll be on your way to creating a marketing plan that you can use as a blueprint for your small business when you've answered these targeted questions.
A Financial Plan
Your financial plan is last, but it may very well be the most important of these three plans. Without the funds to launch and maintain your business, it will very likely sputter and die when it runs out of financial fuel. Keep in mind that it takes most new businesses months or even years to begin to make a profit. This is why you have to make sure you have your financial bases covered until you're able to create a healthy cash flow.
Start your financial plan by figuring out how much capital you'll require to start your business and where that capital will come from. Create a spreadsheet of all of the expenses you anticipate in launching your business. Some items on your list may include:
- Office space/store location
- Remodeling work
- Starting inventory
- Public utility deposits
- Legal and other professional fees
- Licenses and permits
- Employee training
- Website and other digital properties
- Marketing collateral
- Grand opening event
- Advertising for grand opening
Include the cost — or estimated cost — of each expense and total them to get an idea of the initial capital you'll need to get your doors opened.
Now do the same exercise focusing on anticipated ongoing monthly expenses. Your list may include some of the following:
- Your salary
- Staff salaries
- Advertising and promotion
- Shipping and handling
- High-speed Internet
- Website maintenance
- IT services
- Bookkeeping or accounting services
Total up the estimated cost of each of these items to get an idea of your monthly expenses. Multiply that number by 12 to get an estimate of what it will cost to keep your business afloat for one year.
The last piece of your financial plan is estimating what your business will bring in, immediately and as it grows. You can't see into the future so you won't know with 100-percent certainty how successful your business will be or how long it will take before it generates income. Be conservative in this step. Use the information on your projected income from your business plan as a starting point, then add in more details to fine tune your estimates.
With your completed spreadsheet, you should have a very clear idea of how much you'll need to start your business. You can begin exploring small business funding options.
You may realize you need to do some additional research to gather information about the market as you begin working on your three plans. You may need more information to develop pricing strategies or reach cost projections. Take the time to get all the information you'll need so your plans are comprehensive and accurate. If you get stuck, consider enlisting the help of an expert — a business consultant, marketing expert or accountant — to help you through. You can also reach out to your local SCORE chapter to get free business advice and mentoring.