How to Start a Small Business

Most entrepreneurs are not adequately prepared to go into business. While they may have the motivation, desire and talent, many do not take the time to properly plan, investigate and research the business they are interested in starting.

Like a chess game, success in small business starts with decisive and correct opening moves. And, although initial mistakes are not fatal, it takes skill, discipline and hard work to regain the advantage.

To increase your chance for success, take the time, up front, to explore and evaluate your business and personal goals. Then build a comprehensive and well thought out business plan that will help you reach these goals.

The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you set out to raise money for your business. It should also provide milestones to gauge your success.

Business Plan

An important step in starting your business is to develop a business plan. The plan will help you define what your business is about, how you are going to market your product, and how your business will operate.

The elements of a business plan include:

1. Introduction
2. Marketing
3. Finance
4. Management
5. Operations

The Introduction to your business plan should:

• Give a detailed description of the business.
• Explain the type of business.
• Discuss the ownership of the business and its legal structure.
• List the skills and experience you bring to the business.
• Discuss the products and services offered.
• Discuss the advantages over your competitors.

The Marketing section of your business plan should:

• Identify the demand for your product or service.
• Identify your customers and their locations.
• Explain how your product or service will be advertised.
• Explain how your product or service will be delivered.
• Explain your pricing strategy.

The Finance section of your business plan will:

• Explain your source and amount of initial equity capital.
• Develop a monthly operating budget for the first year.
• Provide three years of projected quarterly balance sheets and profit/loss statements.
• Provide monthly cash flow statements for a two-year period that tie to the yearly profit/loss statements.
• Discuss your breakeven point.
• Explain your personal balance sheet and how you will compensate yourself.
• Discuss how and who will maintain your accounting records.
• Provide ''what if'' statements to address any negative situations that may develop.

The Management section of your business plan will:

• Identify the owner/owners and key employees.
• Discuss the skills and experience they bring to the business.

The Operations section of your business plan will:

• Explain how the business will be managed on a day-to-day basis.
• Discuss how you will hire your employees and other personnel procedures.
• Discuss insurance, lease or rent agreements and any other issues pertinent to your business.

Once you have completed writing the business plan, review it with a Small Business Development Center (SBDC) representative or a business associate that you trust. When you feel comfortable with the content and structure, make an appointment to review and discuss it with your banker. The business plan is a flexible document that will change as your business grows.