If starting a small business was easy, everyone would do it - but they don’t, because it isn’t. The truth is that there isn’t one right way to get started with a small business, and there’s no recipe for instant success (though if you discover one, please let us in on your secrets). Some businesses succeed while others fail, and it can be almost impossible to know which way the cards will fall.
We know one thing for sure, though. Launching a new venture requires a lot of research, careful planning, and (of course) a healthy dose of hard work. While it’s true that you could jump into your new pursuit without much planning, studies show that businesses with a business plan are more likely to succeed than those without.
If you’re not ready to commit to a formal small business plan but need a bit of help thinking through this pivotal planning stage for your business, here are 3 simple questions to get you started.
3 Questions To Ask Before You Create a Small Business Plan
Is there a market for my small business?
You would be amazed at the number of people who start a business without considering whether or not there is a market for the product or service they offer. Sounds crazy, right? And yet…
Before you get any further, you should take some time to conduct a market analysis for your business. The Small Business Administration recommends engaging in some competitive research. Who is your business serving? Is the industry you are trying to enter one that is growing, or at least stable enough to justify entering the market? What are your future competitors doing? What’s working for them and what could you do better with your new business?
How will my small business work?
Have your considered the logistics of running your small business? You should put some thought into how your new venture will operate day-to-day. Ask yourself:
- Do you need to hire staff? What positions will you need to fill, what are their responsibilities, and how much will you be able to pay these team members?
- What are your hours of operation?
- What are your operational costs?
- Where will you get your supplies?
- How will you control the quality of your work?
By considering some logistics early on, you will be able to plan out what your business looks like right now and what you want it to look like in 5 years.
Will I be able to turn a profit?
When you’re feeling inspired by a new small business plan, crunching numbers can be a huge bummer. But this reality check is necessary before you get any further. In the United States, more than half a million new businesses are created each year. Sadly, about half of all of these new companies go under within the first 5 years. To beat these terrible odds, you need to get real about what it means to turn a profit.
We recommend a break-even analysis to get you started. Once you have a sense of your operational costs, you can start to figure out what you would need to produce (and charge) in order to begin to turn a profit. You should have estimates for the following:
- Your fixed costs (aka your overhead)
- Your sales revenue
- The average gross profit for each sale you make
- Your average gross profit percentage
If these numbers look positive, hooray! You may be on your way to a profitable small business plan. If not, consider going back to the drawing board: can you charge more for your services, or perhaps re-tool your product so that there is an additional value for new customers?
Planning might be dull, but it’s so essential to making a small business grow. By giving these questions some thought, you’ll benefit yourself in the long run and even avoid some pitfalls.