The Most Important Thing to Starting Up a Business

A business plan is an important goal-setting tool to measure the progress of your business.

Writing the business plan is the most important thing to do when you start a business. According to the Small Business Administration, a thorough business plan does three main things for your business: establishes a plan, a management structure and communicates information clearly. A thorough business plan helps you budget resources, adopt appropriate strategies and inform stakeholders how the business generates profits, which is important to attract investors.

Research

Substantial research is the most important step to prepare your business plan. Starting and later running a business, especially if you start a solo operation, includes more than just an interest in a particular industry or skill. Researching economic, industry and local trends is important to learn about the elements that directly influence your access to customers, credit and your ability to start your business in the first place. For instance, good research helps you determine if there is a market to sustain your business at all. Finding this out before you invest in your startup avoids wasting resources better spent on another venture.

Market

One of the key findings of your research is identifying your niche, or target market. Most new businesses cannot afford to please all potential customers, so starting out focused on a particular segment is helpful when you start your business. In addition, ensure your target market is manageable in size so as to not overwhelm the capacity of your new business. You can always expand your reach as your business grows in size and reputation. The Small Business Administration (SBA) recommends identifying the size and characteristics of your target consumers, the forms of media you plan to use to reach your customers and the factors that influence the purchasing decisions of your target market.

Financial Information

Writing your business plan also helps you plan the financial aspect of starting your business. According to the SBA, thorough market research is important to forecast how much your business anticipates spending on operations and how much profit you expect to generate. Having accurate financial forecasts is important to potential investors and creditors. For instance, most lenders prefer to evaluate how much money your business intends to make in the next five years before extending lines of credit. This assures your creditors that your business can generate sufficient income to pay back any loans.

Operations

Crafting your business plans also establishes the legal and management structure of your business. The legal structure of your business establishes whether the business is a sole proprietorship, partnership or corporation. Business structures are commonly regulated by state and local governments, which require you to register your business, pay registration fees and taxes. All these issues affect your startup costs and regulate your business activities. In addition, the SBA recommends including a simple organization chart in your business plan that details the roles of your management team and a description of each department. In addition, your creditors may also want to evaluate the qualifications and backgrounds of your managers.

References

• Small Business Administration: Using the Business Plan
• Small Business Administration: Market Analysis
• Small Business Administration: Financials
• Small Business Administration: Organization and Management

Resources

• Small Business Administration: Is Entrepreneurship for You?
• Small Business Administration: Small Business Development Center Locator
• Small Business Administration: Available Free Courses
• Internal Revenue Service: Recommended Reading for Small Business