As the saying goes, “Failing to plan, is planning to fail”. Therefore, planning your business helps if you are considering going into business for yourself.
In the current economy, it seems that more people than ever find employment by going into business for themselves.
For some people, it may be the first time they have ever tried to create a business from nothing, and the experience can be overwhelming. Depending on the business, the list of ‘to dos’ to complete before you open can be very long and it can feel like it all needs to be done at the same time. Taking a methodical, organized approach will structure your thoughts, drive your process and help ensure you don’t forget something.
How to approach your business planning process
One approach to consider when planning your business is to draft a business plan and do some budgeting. The business plan serves to focus your thinking and can act as a checklist for setup. It will address a number of things, including:
- setting out what the focus of your business is;
- the type of customer or client you want to sell to;
- how you intend to reach them (marketing);
- how you intend to sell to them (online, storefront, etc.);
- where you will be located;
- who your suppliers will be;
- what equipment and furniture you will need;
- what licenses you will need;
- the number of employees and/or contractors you will need;
- the government filings you will need to make; and
- all other aspects of the business.
The business plan is also a snapshot of your business that you can present to investors, bankers, and other potential partners.
Planning Your Budget and Numbers
The budgeting process puts numbers to all these things. You should budget for the first twelve months of operation – allocating both revenues and costs on a monthly basis. To properly budget you will need to have a rough guide as to what revenue numbers are realistic and you will have to cost out your expenses.
On the revenue side, you will have to set your unit price for what you are selling as well as the number of units you expect to sell. Be realistic about this. If you are selling more than one item, you will need to do this for each item you aim to sell. The process of setting prices will also help on the expense side. You will need to know how much costs attach to each item you are selling, and what you need to charge to make a profit.
Planning the Cost of Running Your Business
On the expense side, you will have to determine what your one-time capital costs are and what your ongoing costs are as well as the frequency of those ongoing costs. If you are running a retail operation, you will need to do inventory costing, tying the allocation of costs to future revenues. Also, each possible expense will need to be identified. This will provide a level of detail that can help identify items for your ‘to-do’ list.
But the budget and business plan can also be important going forward. Once you have completed the first year of business operation, review the business plan and identify items that can be improved upon or were missed. Experience can help refine your approach. Also, compare your actual revenue and expense numbers with your budget and use that as a lesson for more accurate budgeting in the future.
Available Resources to help you Plan
Do not worry if the idea of a budget or business plan is new to you. Samples can be found on the internet or even in libraries. You can use the samples to give you an idea of what to include, how much detail is expected and how it should be organized. But remember – only use the samples as a guide. Take the time and energy to develop yours from the beginning.
For the first-time small business person, the process of starting a business can be daunting and chaotic. Taking the time to develop a business plan and budget can help focus your thoughts, break down the task into smaller, more manageable pieces and act as the basis for developing your pre-opening checklist. Doing these things will help make the opening of your business go a little more smoothly.