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Step 8: Create a plan for your business idea


5-boy-biz-plan1Lots of research over many years has shown that the businesses that are most likely to survive longer than two years started with a business plan. The simple fact is that anyone who makes the effort to do the research and write a business plan is better prepared to deal with all of the unexpected things that come up in the first year of a business.

This Toolkit does not have all of the steps you need to follow to complete a full business plan. There are lots of services online that offer support in this area.

And, all of the work you’ve done so far will definitely help you when you do decide to write it.

The other good reason to write a business plan is to show people who might be interested in investing in your new company. Any investor or bank or Community Futures office will want to see your business plan to help them decide if they think it would be a safe investment to lend you money.

But, even if you don’t think you’ll need to borrow money to get started, do the exercises in this section. You’ll be glad you did since they’ll help you make smart money decisions.

Key parts of a business plan

Description of the business

1. Your Products – the goods or services you will provide

  • You worked on this in exercises 7a: Create your sales pitch kit; and 8a: Figure out how much to charge for your product

2. Your Customers – the people who will buy your products, and why they will buy

  • You worked on this in exercise 5a: Make sure you’ll have customers

3. Your Marketing Plan – how you will tell your customers to buy from you

  • You worked on this in exercises 7a: Create your sales pitch kit; and 7b: Develop your sales pitch talk

4. Your Competition – other companies who are competing for your customers

  • You worked on this in exercises 6c: Interview local business people; and will work on 8a: Figure out how much to charge for your product in this Step.

Market Research

5. Customer surveys; the experience of firms doing similar things; feedback from trade associations, Chambers of Commerce, and other related business organizations.

  • You worked on this in exercise 6c: Interview local business people

Management

6. The skills and abilities of the person or people who will be setting the direction for the company.

  • You worked on this in exercises 3b: Your entrepreneurial traits, strengths and weaknesses

Financial Projections

7. Cash flow forecast for the first 12 months of operation

  • You will work on this in exercises 8b: Figure out your cash flow

Exercise 8a: Figure out how much to charge for your product
Figuring out a good price for your new product or service is one of the most important decisions you’ll make in your business. If your price is too high, then you won’t get the number of customers you’ll need to be successful. And if your price is too low, you could put yourself out of business by not making enough money to cover your costs and paying yourself. This exercise will help you figure out how much to charge for your work.

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Exercise 8b: Figure out your personal cash flow
It may not be easy and probably won’t be fun, but it is critical that you figure out how much money you spend every month. This is called your cash flow. You need to know what this is so you know exactly how much money you need to earn from your business. Take your time, do this right, and you increase your chances of being successful by a lot.

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Wow!  You have completed the Explorer!  Click here for Step Nine, the online Resource Section