As small business owners, we are proud to see Grande Prairie entrepreneurs kick-starting their business ideas every year. If going into business for yourself, or with partners, is a dream of yours, starting with a comprehensive business plan should be your first step.
Forget about the binder-thick business plan that sits on the shelf. Today’s business owners need plans that are concise and actionable to serve as a roadmap toward reaching clearly defined goals.
Why Start a Business?
Before getting into the details of the business, take the time to identify the reason for going into business. Starting a business can create uncertainty and a wealth of challenges. Having the reason clearly defined early in the process can help steer the plan by serving as s focal point.
Pinpoint the fundamental reason for becoming an entrepreneur. You may feel the reason is obvious, but by using self-reflection and questioning your why, you can more clearly define your why into a relatable mission statement.
Who Do You Serve?
The next step towards writing a business plan is to define the target market. Understanding who your customers are and how they will use or access your product or service will make it easier to attract them. Below are a few questions to ask yourself to help define the business’ target market:
- Where are they? – Before starting marketing strategies and advertising plans, you need to know where your target market is reachable.
- Can they purchase? – Target markets must have the financial resources to purchase the product or service provided.
- Do they have a problem? – Your business should solve a problem or otherwise create value in the lives of the target market. Typically, the solution to a larger problem will hold a higher value, which can also narrow down the target audience based on the ability to buy.
- Where is the market going? – If the market for your product or service is saturated, look for a niche. For emerging markets, evaluate the risks of fads or trends and opportunities to stand out
How Does Your Business Create Value?
The next step in writing a business plan is to describe how the business creates value for the target market. To improve the value of their products and services, a business should focus on their audience’s key values and communicate them.
Consider the following values and write an offer statement the target audience can relate to.:
- Time – Does your business offer to do something faster? What is the turnaround time from purchase to delivery or use?
- Certainly – How will reduce customer reluctance and increase consumer confidence?. This could be a guarantee, a return policy, or peer influencers from the target audience.
- Effort or Sacrifice – Are you removing barriers for customers? Consider the customers’ experience and remove or reduce areas that could become pain points. This includes distribution locations, point-of-sale systems, delivery options and timelines, assembly and post-purchase support. ,
- Problems – What problem are you solving? Providing a solution to the problem the target market has should be at the core of the business.
What Do You Value?
Having a set of core values can help guide tough business decisions. By staying true to a small set of core values, they also become part of the business culture and brand.
For example, a business with a core value of simplicity would avoid long, wordy, technical language in communications. A business that values innovation may allocate a larger portion of its budget to research and development or reinvestment.
What Do You Do?
Next, the business plan should state what the business does and why. This should specify the core focus of the business and the value it provides to the customer.
What Does Success Look?
When you know where you are going, it’s easier to build a road map to get there. Write long, mid and short-term goals by defining what success looks like in ten, five and one year. To achieve your revenue or profit goals, what do you need: expanding services, locations, staff, customers, or price per transaction? Use your short and mid-term goals to guide your business towards larger targets.
How Are You Paying for This?
Start-up costs vary drastically depending on the business. Create an initial budget for everything required to make your first sale.
List all sources and amounts of investment needed to start your business. You may choose to use any combination of the following funding sources:
- Personal savings
- Contributions from family or friends
- Government grants
- Bank Loans
- Crowdfunding
- Private investors
Next, list all start-up costs. Common examples include:
- Business registration fees
- Professional services
- Software
- Initial Marketing and Branding
- Equipment
Subtract start-up costs from the initial investment to calculate the opening cash balance.
Now it’s time to project revenue. This will only be a best estimate. To estimate your monthly revenue, calculate the average revenue per customer, per transaction, and the number of customers.
Next, subtract all ongoing expenses to operate, such as
- Utilities
- Business Insurance
- Inputs or Raw Materials
- Rent or Lease Payments
- Licensing Fees
- Advertising
- Supplies
- Fuel or Travel
- Professional Services (Accountant, Lawyer)
This provides an estimate for monthly cash balances and provides insight into the cash flow of the business. The cash balance predicts when the business becomes profitable. If the ending cash balance is a negative number, other funding sources may be required or revenues may need to increase to improve the business’s cash flow.
While the numbers are important to running a profitable business, a well-structured business plan does more than that. It helps you identify your target market, communicate your mission, and make business decisions based on core values to achieve success. If you’re looking to launch a new business here in Grande Prairie, call McNabb Lucuk LLP. We’d be happy to answer your start-up accounting questions.