Starting Your Own Business- Part 2

STARTING YOUR OWN BUSINESS
(a three part series)
Part Two: Getting Started

by Michelene Malosh

Publisher’s Note: You can read Part One of this series on-line by pointing your browser to: MODEweekly.com, (formerly MODEmagazine.com) and clicking on the Business section. A complete listing of past business articles is available there.

You’ve got a great idea, a vision of uniqueness and profitability. The timing is right. You’ve done your homework. The practicalities and the pros and cons have been weighed. You are harboring a continuing and escalating passion for what you want to create. You are ready.

Once you are committed to pursuing your dream of starting your own business, what is the one most useful thing you can do to increase your chances of success? Writing a business plan.

In Getting Ready, part one of our three part series, entrepreneurs from the Harrisburg area explained some of the keys to success and the pitfalls to avoid in starting your own business. Our panel of hands-on experts revealed that there are several critical preliminary activities. The first is extensive research, including demographic and data collecting, reading, interviewing and observing others in similar businesses as well as attending workshops on how-to start and run a business. The second is securing sufficient start-up operating capital. The third is a reality check. An aspiring entrepreneur must examine all the factors concerning their particular business, such as location, accessibility, visibility and customers’ needs. Along with examining all these factors comes the value and importance of writing it all down in an organized layout, known as a business plan.

What exactly is a business plan? Why is it universally considered the most important tool when starting and running a business? In this installment of Starting Your Own Business, we will tell you what a business plan is, why it is important, the major components of a good one, and some of the ramifications when one isn’t used.

Every start-up and operating business needs a business plan. A solid, well-written business plan is a must before any investor or traditional financial lending source will take you seriously. The business plan is a detailed written document that clearly describes your vision and captures all the important details of your business. It becomes the blueprint for planning, operating, and evaluating your business. It’s a working document; it’s not cast in concrete. The plan begins as a starting point and acts like a compass that alerts you to adjustments or enhancements that should be made along the way. Prior to investing your time and money into a new business, the well-developed business plan can give you strong indicators whether to abandon ship or sail full steam ahead.

When starting a business, a business plan provides you with an initial framework for your idea. It forces you to look at all the important success and failure factors that surround your particular business. Additionally, it helps you measure the probability for profit and survival. The research and foresight necessary in developing a business plan should answer the question: is starting this business really worth it?

The content of all well-developed business plans describes the concept and specific objectives of your company and outlines six essential elements: where, what, why, when, who, and how.

Where the business is to be located may be determined by considering its purpose, the competition, the capabilities of management and the opportunities for success. What direction you are going with the business can be answered by establishing short- and long-term goals.

Why the business will succeed is determined by identifying market and product advantages.

When the business arrives is indicated by milestones measured in profits, sales calls, number of employees, and so forth, per the plan.

Who defines the background and experience you bring to the business that will allow you to be successful. Who also defines each person’s specific responsibilities for accomplishing the goals of the business.

What are you going to do? A description of the business concept, the products and services you will be providing, the market you will serve, how much money you will invest and how much you will borrow, if needed.

How describes your strategies for implementation and success. How will you meet your financial responsibilities, compete with others in the marketplace, learn new management skills, communicate with your customers?

There isn’t a particular template to adhere to when writing a business plan. The length, the specific segments, and the sequence of each business plan will vary depending on the nature of the business and how the plan is used. Without exception, all business plans have to be written clearly and be easily understood.

If you are pondering starting your own business or if you have an existing business but wish to fine-tune your strategic planning process, the Harrisburg area has consulting and mentoring services for anyone wanting feedback and assistance. Usually, these services can be obtained for no cost. Currently, the local organizations that provide business planning assistance include: the Kutztown University Small Business Development Center (SBDC), 2986 North Second Street, Harrisburg, PA 17110 (717) 720-4230 and Greater Harrisburg Area SCORE (Service Corps of Retired Executives), 4211 Trindle Road, Camp Hill, PA 17011 (717) 761-4304.

To give us a sample of what a good, comprehensive business plan contains, the following list of business plan essentials has been provided by Mike Urenovitch, a business consultant with the Kutztown SBDC and Merrill C. Horine, volunteer counselor and local chapter secretary at the Greater Harrisburg Area SCORE.

ESSENTIAL COMPONENTS OF A GOOD BUSINESS PLAN:

1) EXECUTIVE SUMMARY

The executive summary is used to emphasize the key points and features of your business plan. It provides the reader with the "big picture" and lays the groundwork and outline for the rest of the plan. The summary usually appears first in the business plan, but it shouldn’t be written until after the plan has been completed.

Elements to be included in the executive summary include: a listing and description of your business’ philosophies, mission statement, objectives and goals, products and services, customers, target market, critical factors of success and their indicators, sources of funding, capital, lending needs, and projected revenue.

It is important to be as specific as possible with your goals and strategies. By using numbers and specific, descriptive words and phrases, your plan will be a more usable document and will make it easier to track your actual implementation results against your projects.

2) COMPANY

This section should include a detailed description of your company and your concept. Essentially it illustrates: the type of business and its size, history of the business, the characteristics and uniqueness of your company, your start-up plan. Additionally, if you are writing this plan with securing financing in mind, include sources of funding and uses (what you will do with the money, how will you spend it).

3) PRODUCTS & SERVICES

Be sure to have a detailed description of the products and services your company will provide and what niche your company will fall into in the marketplace. Include in your list: unique features, patents, description of why, when and how this product/service will look and be delivered, and how it will impact and be affected by technology. Make sure, as well, that you compare and contrast your product with any competitors.

4) SALES & MARKETING

It is important to identify and do a detailed analysis of your industry and your company’s target market. Identify, specifically: Who are your potential customers? Where are they? How many are there? Geographically, is your company’s market local, regional, national, or international? What are the factors that will support (or hinder) reaching your customer-base and what is your strategy? Provide a good description of your market segment(s).

Other elements to include: a description of promotional activities and advertising, packaging, customer service policies, growth strategies, and sales projections. Most revenue in business is generated by sales. What are your sales goals? What are your pricing objectives, methods?

Since all financial projections relate to customers, it is important to estimate using specific numbers in this segment.

5) THE ORGANIZATION

This portion includes a description of your company’s organizational structure, management team and strategy, and your staffing and employment needs and issues. Include number of employees and their tasks, anticipated staffing needs, and the growth capability of your organization.

6) PRODUCTION AND OPERATONS

This is the nuts and bolts of your business. It should include the type of building and facilities you will need as well as the lease or purchase specifications for acquisition. Also take into consideration your equipment needs (machines, vehicles and agreements), the suppliers and the credit terms, as well as production processes and costs.

7) FINANCIAL ANALYSIS

This is the "SHOW ME THE MONEY" part of your plan. It provides projections and specific figures on your estimated expenses, revenues, and cash flow. This bottom-line data should indicate to both you and the lender if your business has the probability of being profitable. Includes: start-up costs, sources and uses of funds, balance sheets (opening day and projected three years), projected cash flow (three years), profit and loss forecast or statement (three years), break-even analysis, existing business: historical statements for three past years, personal financial statement of owners, assumptions used in preparation of financial projections. These numbers should correspond to the plan’s other segments.

8) STRATEGIC PLANNING AND IMPLEMENTATION

Important to do but often forgotten: tying it all together. Review all segments of your plan and determine and show the congruence of all your information and data. Using a road map format, demonstrate what you will accomplish and how, sequentially. In the strategic plan, describe the future of your company, your vision; long term, where are you going, what are your goals? Identify and describe the milestones of achievement, the indicators of success, and the potential landmarks for expanded opportunities in the market.

Developing a business plan is a process and a tool for you to use in many useful ways. It helps you determine the feasibility and desirability of starting a new business venture, helps you to track and assess your actual day-to-day business success and allows you to make just-in-time adjustments, expansions; and it enhances your ability to raise capital and obtain business loans. Yes, it’s a lot of work, but the investment you make in writing a thorough and carefully crafted business plan will pay-off in multiple ways and will answer the most important questions of them all: Can it be profitable? Could I survive the first year? What is the potential that my business can thrive? Should I do it?

See Part Three of this series in the September issue of MODE, where we will discuss the ongoing operation of a start-up business, and what can be done to guarantee success.