Starting and building a business from scratch can be quite overwhelming even for seasoned business owners. While some business owners shrink from the idea of drafting a business plan, it is a good idea to plan for the future and get your business on track. One of the most important considerations when starting up is the big question of funding.
After some research, we found some articles speaking about a list of businesses that required less than $100 to start, but to be truthful, all business ventures require some funding. When you begin a new venture, you often need to sustain yourself on savings for months before you build a client base that provides enough to maintain your basic lifestyle. Although there are many templates available you can use to build your plan, you will need to honestly address a few questions concerning your business. These should be answered truthfully before you decide to invest your life savings in any venture:
1. What makes your product different from others?
Make sure there is a need, desire, or requirement for the product concerned. This is the first step: where you identify the requirement your product will fulfill. Further, you will need to determine how and by whom the same requirement is being met at present. You should acknowledge and research the main players/producers of the current product in the market. Learn from their mistakes, and examine the workings of their businesses before you begin planning your own. Another question is why would a customer buy your product instead of your competitors? You should be able to answer all these questions clearly and correctly before starting on a definite project.
2. Is the segment in the market large enough to value your product?
Pinpoint the segment in the market that will value your product, or whatever factor differentiates your product from the others already present. You should be able to estimate the size of the market segment, too. Now, you can calculate the percentage of people who will not be willing to buy the product at your cost to make your business fruitful. Will you be able to project a reasonable volume of buyers to make your business viable?
3. Whatever the aspect is that differentiates your product from others, is it justifiable?
Even if your idea is a great one, are you sure there are not others who have the means to copy what you are doing and attempt to push you out of the market? Due to the large number of people who have no investment problems but lack good ideas, not being able to justify a change in an existing product can result in established providers of the product overtaking you in the market. You may be protecting your trademark by patenting it, but it is never difficult for people to find a way to compete with you. Your marketing strategy should be based on the strategy of other similar businesses.
4. Will you be able to connect with your targeted customers?
Make sure that your concepts are clear on how you will connect with your target customers. Spreading your marketing message effectively is one of the ways. Once you have identified your target audience, you need to develop and implement a strategy on the best way to reach them, such as radio, television, or social networking sites. This, to a large extent, depends on where your target customers look for information.
You should outline your plan regarding the most cost effective ways to win over new customers. Your product will be no use if the cost per customer is $60 and you are making just $40 for every new customer.
5. Will you be able to prove the sustainability of your idea in the least possible time with a minimum of expense?
If you have to make a big investment for launching your product, find a way out of it. There are other ways and means to get your product from concept to production with a minimum of investment, like manufacturing that can be outsourced or making do without purchasing expensive machinery.
It is advisable to spend less on the launch as initial versions of products are likely to fail. Study the reaction of the market and make suitable changes. Use what you learn, and prove your concepts will succeed before you invest in the total rollout. Sometimes you may need to sell the initial products at a loss, but if that is accepted as part of a long-term plan then you are sure to make a profit at a later date.
6. Name the key players of your business venture
Be sure to name the whole team, beginning with the management team, board of directors, and business advisors. Just naming them is not enough, you need to highlight their field of expertise and experience.
7. What is the economics of your cash flow?
The first step is to define your sources of revenue, including costs, margins, pricing structures and expenses. Identify the amount of money required to get your business started before it starts generating revenue.
Ensure a capable financial model that will help support your decision to move ahead. New products often cost more and take longer to launch, so unless you have the right experience when it comes to launching new products, it is always better to take a conservative approach. The real costs often exceed the estimates; if you feel the financing of your product is not looking positive, then you will need to rethink it. If you require outside funding, identify your sources beforehand.
8. What needs to be done to break even?
You need to constantly study the financial aspects, predictions, and forecasts to determine the number of sales required to cover your expenses and turn a profit. In the first two years particularly, you will need to include the monthly breakdowns to track profitability.
9. What are the strong and weak points of your business?
This is a crucial point because the success of your business depends on capitalizing on your strengths, and tackling your weaknesses. Most people do not have enough clarity about what they are doing. So, when you put your business plan on paper, you have an opportunity to be thorough and honest in your assessment. In the present competitive world, filled with technological advancements, all businesses have to face certain challenges. You will need to overcome these, such as hiring skilled employees or responding positively and instantly to market changes.
Launching a new product is often fraught with difficulties. Although it can be exciting and productive, you have to be prepared for failure. Whether your main goal is to find an investor or apply for a business loan - or just bring about an improvement in running your business - you should answer these nine questions truthfully so you can make informed decisions based upon them.
All capital-intensive industries require a large amount of investment to start with, but is it possible to start a new venture without much funding, if you have the talent, motivation, and entrepreneurial spirit? Feel free to comment below!
