Sunday, June 27, 2010
Up to now I've talked mainly about money or the lack thereof. And that's not a bad way to begin. It is actually one of the three components of a business plan. Money in a startup business is extremely important. Most of the time people who begin a homebased business deal with money issues long before they sit down and decide where the business is headed in five years time. These blog entries I'm doing are basically to show you how Megan and I are starting up our home-based business called Five and Nineteen Blackbirds. So far I've talked about us getting a handle on the money, inventory, and supplies and what it cost to make our product. These are all things that we need to know and of which we need to be continually aware.
In a lot of ways I should have started with telling you about our business plan in its totality. Most businesses start with a business plan and we've had one from the beginning (ever since we talked and then decided, oh my, we need to begin with the basics) but since we were developing it for our own purpose, and not for one like taking it to a bank and asking for a loan, I've delayed a few entries from telling you about it. The money issues seemed to be more important in our minds.
A business plan can be as simple as scribbling it on the back of your kid's coloring page or as fancy as taking it to a printer and getting it printed and beautifully bound. The route you take depends on the reason why you've written it. Ours was more like the back of a coloring page. It was/is just for us so that we know where we are going with the business in a year, two years, and five years with space to fill in after that. We have patience, talent and, so far, know the direction we want our business to take.
What is a business plan you might wonder. There are basically three parts to any business plan and that is: a business concept, a marketplace section, and, of course, a money (financial) section. Like I said our plan is pretty simple because even starting out simple things get more complex as you go. Ours will not be the exception. Simplicity is a totally underused concept as far as I'm concerned. Keeping things simple allows you to take away or add to quite easily. To see at a glance where you are. We know what Five and Nineteen Blackbirds is, what product we are making, and how to underwrite it. Simple. For now.
So for the first part: A Business Concept. Sounds fancy, doesn't it. This section involved what business structure we decided upon, our product, and how we plan to make our business a success. I can tell you for sure there is a lot of hard work involved in this first part--especially on Megan's part. Creating is always time consuming but extremely rewarding. What products we might add to the paper doll line. How and when this might happen. All the little and not so little details that make your business happen on a daily, weekly, monthly basis. This is where your projection into the future happens, too. Where do you want to be in one year; three years, five years?
Section Two: Of course, of major interest, is where and to whom will you be selling your product? Who are all those potential customers and how can you show your product to them and, more to the point, get them to buy it? Why would they buy it and for how much? Who is your main competition? Is their product better or worse than yours? Is it priced lower? Higher? or somewhere inbetween? This section is better known as marketing your product. Always, always thinking about what the customer might want. Thinking about competition and quality and dollar values on your product compared to the competition. This is where your unique selling strategy comes into play. What ways will use to get your product out there on the market so people know about it and want to buy it?
The final section is what my first entries dealt with in terms of money. The accounting part of it. How much you have, where it goes, what is your break even point, at what price do you sell your product? Can you keep your business in the black? Can you underwrite your strategies from the first two sections? Is your cash flow healthy? This is definitely the money part of it. In a lot of ways this part is the most important starting point because if you can't underwrite your dreams, they just aren't going to happen. But as time flies by all three parts become equally important.
The rate of failure of small businesses is high. There are a lot of reasons for this but most go back to unwise use of money or poor product quality or bad management policies. That is why you must be continually learning new and better ways of running your business. Talk to other small business owners and exchange information. This can be quite helpful to a first time small business owner.
A good source of information on how to make your business better is your local public library where they have books on small businesses, how to start and run a business and all the questions inbetween. Libraries where you live are generally free so seek them out and learn a lot.