So you’ve been there done that and you’ve managed to find the courage to do it all over again. One of the first steps would be to put together a business plan. There are various views on whether or not a business plan is helpful for new businesses. Whatever side of the argument you stand, some level of planning is absolutely necessary and non-negotiable if you want to give your business a good fighting chance.
Most times, business plans are prepared in a perfunctory manner; treated as a ‘fill in the blanks’ puzzle as opposed to an investigative exercise; whose results are unknown at the start. Strategies that are not based on facts will get you nowhere. The business plan cannot be largely based on assumptions and here lies the key. Even if you do not feel a business plan is necessary, the elements of the plan will take you through exercises and thought processes which will either validate or nullify your business ambition. It would simply be a poor decision not to do one. Successful businesses who claim not to have had a business plan at the start are exceptions and not the rule.
There are key elements of a business plan which once answered, should give a good indication whether or not you should proceed with your idea.
Do you have the right product/service?
Everyone thinks they have a good idea when starting a business. Whilst passion is a great ingredient to have, if it’s not tempered, it’s also the one thing that is responsible for making businesses veer off course. You only have the right product or service if people will pay for it. It is therefore imperative that before you go any further you prove that people want it; otherwise it’s not a good idea. Conduct surveys, show buyers and potential customers your product, speak to professionals, etc. Make sure you have compelling evidence to take things further.
Do you know your market intimately?
Before you think about selling your product or service, you must know your target market. Who is going to pay for your product? It is not good enough to say, for example, that your product is for women. You must be specific. You’ll need to know how old they are; where they eat; what type of coffee they like; how much they earn; their marital status; do they have children; where do they shop and so on and so forth. The more you know your market, the easier it is to find the customer as well as determine the qualities required of the product, the price, where you are going to distribute it and how to promote it. It is obviously no good have a great product if it is out the reach of the customer.
What is your unique selling point?
It is important to know your competition and understand the industry you are in. It is quite possible to have a great product/service that people are willing to buy but there are many competitors in the industry offering the same thing. All you have is a great plan and no means of executing it as you are not offering consumers anything different. By understanding the environment of your potential business (employing a SWOT and PEST analysis) you will know whether or not your product will thrive in the environment or be squeezed out. If you don’t have enough of a ‘uniqueness’ to your product/service, your business won’t kick off talk less of survive.
Is your product/service priced right?
Before considering a pricing strategy i.e. whether to price for the mass market or luxury market; you’ll need to find the balance between making a decent profit and what the target market customer is willing to pay. Frankly, the customer dictates how much the product should be; unless, of course, you have a niche product with unique attributes that are exclusive to you. However, with pressure from other competitors and possible substitutes for your product, it’s imperative that the price is right. Once again, this is one aspect that you can’t afford to base on assumptions. You must know the actual costs associated with your product and ensure that you are able to cover your costs. If facts reveal that you will not meet the cost of your overheads at a certain price and to increase it would mean to price yourself out of the market, STOP. If you are unable to bring the costs down, then it simply won’t be worth your time and effort to continue.
Have you tested the market?
Prove that your plan works by starting out on a small scale. To all intents and purposes, you’ve got a good plan. However you don’t know whether it’ll work or not. The best way to build confidence in your plan is to test the market by starting small before investing loads of money into the business. For example before you open up a patisserie, take some cupcakes to the local farmers market or fair and sell them there. Assess people’s interest in them; get their feedback; analyse your pricing and costs. If it works, then you’ve got the basis for starting this business.
If you have learnt anything from the failure of your previous business it would be not to rush the process. It’s not unheard of to find that some people spent two to three years putting together a business plan. Sometimes we sabotage our progress by not taking the time to plan properly. With hard work and a little bit of luck, it should work out.