Starting a new business is so exciting that you might be tempted to jump right in without developing a plan. But before you launch, it’s important to answer these questions:
- Who is your target market? You should be able to describe the prospective customers you plan to attract very specifically—not just “women” or “teenagers” but “urban professional women over 40” or “fashion-conscious, plus-size teenage girls.” Define their age range, income, marital status, location, interests and disposable income; figure out where they like to shop both online and off. Doing market research will help you find the target market with the biggest potential.
- What makes your business different from (and better than) the competition? Every business has competition—do market research to uncover yours. Investigate how they sell, their prices, their brand image, their locations and their customer service. What are they good at, and what could you do better? Are they leaving opportunities or money on the table that you could capitalize on?
- Where will you start up? Depending on your industry, you may need to rent a retail store, a restaurant site, a commercial office or a warehouse. Or you may be able to launch from your home or from a desk in a shared office space. Consider costs, whether you’ll need space for employees and whether you will be meeting with customers in the location. Your location will also determine the type of business insurance and what risks you need to protect yourself against.
- Will you hire employees? Some businesses can start with one person, freelance help or independent contractors, but others, such as restaurants or retail stores, require employees. Figure out if you’ll need part-time or full-time workers, and what types of benefits you’ll offer to attract them, such as health insurance and vacation days.
- What are your estimated startup costs? Add up the cost of your location, equipment, inventory, utilities, taxes and insurance, and payroll to come up with an estimate of startup costs. Remember that it typically takes six to 18 months for a business to become profitable, so you’ll need enough money to tide you over until then.
- Where will your startup capital come from? It is difficult to get a loan to start a business from a bank. If you don’t have enough savings to finance your business, other options include obtaining a loan from your friends and family, using a home equity line of credit or financing the business with credit cards. The latter two can be risky, so if you can’t afford the startup costs you’ve estimated, try to figure out a lower-cost way to launch rather than go into too much debt.As you work through these questions, put your answers together in a business plan. Search online for business plan software, and you’ll find lots of options, samples and tutorials to help you put your thoughts in writing.
Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at [email protected], follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.