If you are serious about starting a business, then you are likely painfully aware of the stark fact that most businesses fail within the first few years. The thinking and planning that you do before you start can either set your business on the path to success or seal its fate as a failed project. If you conduct a comprehensive analysis of the market conditions, there will be fewer unforeseen problems in the start up period. When you can anticipate the problems early, you are able to solve them before they become unmanageable. During this process, you may even determine that the business is not such a good idea after all, which could save you a lot of time, money and heartache. Before starting your business, you have a lot of thinking to do. Here are some questions to consider before you even write your business plan:
Have you solicited feedback from your potential customers? So many business owners start their businesses without even talking to the customers that they are planning to serve. This approach is setting your business up to fail because there is a very real possibility that you are operating on at least one or two false assumptions. Is your target audience even interested in your product or service? Would they pay the price that you are planning to charge? What would be the best way to reach them? Is there something in your approach that will limit your success? Feedback from potential customers is well worth the time that it takes to solicit it. This feedback can point you towards opportunities that have never even occurred to you and it can prevent you from making costly mistakes.
What are your strengths? Take some time to assess your strengths, both your own and those of your business. What is going to differentiate you from your competition? Why will you succeed where others have failed? The answer to this question should drive your business model, from how it operates to how you market it. You also need to have a good idea of what you are bringing to the table; what are your skills? In what areas do you possess a high degree of knowledge and experience? You need to know which areas you can cover effectively, and for which areas you will need to hire some help.
Are you being realistic? It is natural to be excited about your business idea, and this enthusiasm will no doubt contribute to your success. However, you need to be cautious of painting an overly rosy picture in your analysis of the market conditions and in your projections. Particularly when you are trying to raise money, you may be inclined to make the conditions sound a little better than they actually are, but if you distort the facts, you may not be ready to deal with the very real challenges that you are going to face, and most investors know that. Even if the conditions aren't perfect for your business, it could still be a great opportunity. When you are realistic about the challenges, you are better equipped to overcome them.
Is your business centred around your customer? Are you completely focused on your customers' needs? How are you going to make and keep your customers happy? Why would they choose you over your competition? For your business to be a success, every decision should be made with your customer in mind.
Have you done your research? There is so much research that you need to do prior to writing an effective business plan: What are the relevant laws? What are your insurance requirements? What types of funding opportunities are available? What will your start up costs be? What is your breakeven point? Who is your competition? How strong is the demand for your product or service Who is your target audience? What is your marketing plan? If you are doing your research properly, it will be time consuming, but business owners who don't do proper research inevitably make expensive mistakes.
Do you have an experienced business mentor? In business, nothing replaces experience. Having somebody who has successfully started and run their own business to bounce ideas off of can be very valuable to you. It gives you the opportunity to benefit from their experience, their mistakes and possibly even their connections. If you don't currently know any business owners, join some local business networking groups to make some connections. You will find that many people will be more than willing to help you; all you need to do is ask.
Are you ready for this? Starting your own business is not for the faint of heart. There will be many long days, sleepless nights, and moments when you want to give it all up. You will have to devote yourself completely to your business, and it will likely be some time before your business turns a profit (or even breaks even). Are you at a period in your life where you will be able to handle this mental, emotional, and financial stress? Will your family be able to support you and understand that, especially at first, you may not be able to be there for them as much as you have been in the past? Sometimes it's the right idea, but the wrong time. Be honest with yourself about your situation and your capacity. You don't want to wait until you're heavily invested in your business to realize that it's just not going to work.
In the excitement of starting your own business, there can be a temptation to just jump right into it. Don't fall into that trap. Take the business planning process very seriously. While you may only be making the formal business plan because it is a requirement for the bank or for a funder, think of it as your road map. Use it to guide you in everything that you do and when you get off track, use it to find your way back. Of course, you will need to be flexible as conditions will change and you may find that your research hasn't completely prepared you for the realities of the market. But on the whole, a solid business plan should set you up for success. Get ready for the ride of your life and hold on!