Starting a business without a business plan is suicidal. Without a planned route as a guide you will not know whether you are heading in the right direction or otherwise. If you thinking of running a business, proper planning is the key to starting your journey in the right direction.
Importance of Business Plan
Included in the business plan should be the nature of the business, its business aims and objectives, an analysis of its viability in a particular location, the company’s image, fulfillment of the legal aspects, cash flow projecting the profit and loss projections and the break even analysis.
A Decisive Target
The good business plan will obviously have a specific target to aim at. This target will keep you on track to achieve the developments and success you aim for. It also acts as a guide for you to make adjustments along the way if something is not working well.
There are also other demands that insist you have a carefully drawn business plan showing how you intend to do the business, where you are heading for and how do you plan to get there.
A good business is always required to be presented to lending banks or any other financial institutions that offer to finance the project. Without a good business plan, you request for financial aid will usually be thrown off.
Steering in the Right Direction
The most common reason why a business plan is needed is to serve as a guide to the entrepreneur on the course of action he is to steer and keep him enlightened on whether his performing on right on track or have gone off course and need to be adjusted accordingly.
If you want your business to survive you need to be fully informed regarding your markets needs, purchasing power and buying patterns. Hence, you need information to help you understand your market better. This essential information is easily obtained by conducting market research.
Determining the size of your market doesn’t need to be complicated. It also doesn’t need to be expensive. Market research can be conducted with little effort by the owner himself at a low cost. Thus, there is no excuse for not doing market research.
In a nutshell, you need to determine the following when doing market research:
- Do people in the area you plan to start your business in, have a need for your product or service?
- Is the need large enough to enable you to make a profit?
- Are there any businesses already operating in the area that are offering a similar product or service?
These questions clearly show that your business will not succeed if there is no market for your business. Although it is advisable to operate a business closely related to your personal interest, people need to have a need for your products.
In other words, you need to focus not on what you like, but on the needs and wants of the people in the area you plan to operate your business in.
Define your market
Your market simply refers to the people, or other businesses, who will buy your goods or use your service. The type of business you operate will determine who your end – users are, other businesses or consumers.
Analysis of your market
You need to do the following analysis after you have determined who the end – users are;
- What is the purchasing power of your customers. In other words what is the personal disposable income of your market or how much other businesses spend on your products or service; and
- The social standing of your customers. That is, what types of homes do they live in, what varieties of food do they enjoy, what brand of clothes do they prefer wearing, etc.
You can ask the following questions in order to establish the socio –economic standing of the people you envision to be your customers:
Do they fail in the lower, middle or higher income group?
what is the average age of your customers? Does it include children and teenagers or is the majority retire persons?
Gender: Is your product or service suitable for both men and women, or only one of the two genders? What about children?
What is your potential customers opinion on clothing, religion, fashion trends, etc?
Is the career of your customers irrelevant or will your products or service only appeal to a certain profession?
The different uses of your product must be established and highlighted in your advertising so as to attract the largest possible market.
You must establish what other products your market prefers over and above the products you offer. Your advertising should then convince them to switch over to your products.
The answers to these questions will enable you to accurately analyze who the people are that you would like to do business with, where they stay and how you can reach them.
The Size Of Your Market
After analyzing the needs of your market randomly, as discussed, you can use the information to establish the size of your total market, while taking into consideration the potential clients in your area.
For example, by using the information you gathered, you can calculate the average income per household, if this is important to you. The average income of people in your area can be determined according to their qualifications and the type of work they do.
Competitors in close proximity to your business will influence your business. Your business will not be successful if your prices are considerably more expensive, or if your service or the quality of your products, is much lower than your competitors.
You can personally visit the premises of competitors and evaluate their pricing and service. Alternatively, friends and family members can visit competitors and gather the required information for you. In this way, you can ensure that you are just as good as your competitors, or even better.
Use The Information You Have Gathered
After you have defined your market, in other words, identified the people who are ultimately going to buy your goods or make use of your service, analyzed your market and product or service, determined the size of your market and analyzed your competitors, you must apply this information to be successful.