By Hugh Campbell
You have had enough. Overbearing bosses, less pay for more time, underappreciated experience and knowledge. Why are you doing it? I know the answer… for a paycheck, benefits and some vacation time. Is it worth it?
Or you are looking around at all of your friends and family going through it and wondering why they put up with it. They can be their own boss. You can be your boss. You have the skills, talent, desire and – most importantly – the confidence to make it happen. Maybe you don’t know how just yet but that doesn’t matter. You can learn.
If you picked up this book, then you are on your way to thinking that having your own start-up is your future. When you are frustrated with your job, the allure of the work-for-yourself dream is strong. Maybe you aren’t frustrated and love your current occupation and employer. But you have a dream of owning your own company and want to get started. Or, you are just starting out and ready to take on the business world. Wherever you may be starting from, let me be the voice of reason. You can do it but you must do it right. That’s what this book is for. To tell you what you need to know to make informed decisions about moving from Employee to Entrepreneur.
There are many things to think about. As Thomas Edison said, “There is far more opportunity than there is ability”. Choosing the right opportunity and making that opportunity work are two different things. It takes careful consideration, planning, preparing and execution. It takes more resources than time and money too. You have to account for the passion and discipline to carry you through the bad days and set you on a path for the good days.
Everyone has heard the phrase “the man”, such as “don’t let the man get you down”. If you research the etymology of the phrase, it will tell you that as a phrase meaning “the boss”, it goes back to 1918. As slang, it has also been used to refer to person, group, entity or organization in a position of authority. In the 1950s, it meant the police or other law enforcement and has since evolved to include the government as a whole. Its common negative connotation now is to refer to whatever is keeping you from moving upward.
It also has a positive connotation in recent pop culture. “The Man” refers to someone who has done something well. It refers a leader, like a team captain in sports. The Man is someone who works hard, succeeds better than others, and reaps the benefits and acclaim that go with it. The Spencer Davis Group had a hit in 1967 with a song called “I’m A Man” and in 2013, Aloe Blacc took the world by storm with “I’m The Man”, a personal anthem now played as the introduction song for just about any sports star you can imagine. Today, the definition of “the man” depends on the context in which it is used.
Oh, and just so we are clear, for the purposes of this book, The Man is not gender specific. Ladies, you too can be The Man.
My Experiences With The Man
Something about me
When I started out, I wished I had a pocket manual, some resource that could give me some idea of what to do and how to do it. That’s why I wrote this book. Hopefully you will find something in here that will help you find your path to success and stay on it.
This book is intended for those who are rushing headlong into the fire of entrepreneurship and a start-up. Everything here is also applicable to someone who is currently working for someone else and wants to start their own business. So let’s address that specific situation for a moment and then get to the good stuff.
Still Working For The Man
A safety net is better than no safety net. Most of us aren’t in a position to quit a paying job to work for free for the months it will take make a business venture successful. Regardless of how you feel about your company or boss, you need to respect their position and yours.
You are an employee of their company. They pay for your time to do their work. You have to honor that commitment. We will talk more about moonlighting and other things that go with it later but for now that’s focus on your employer and your new venture.
The most important thing is that you do not let your new business interfere with your old job. That has the potential to remove your safety net before you are ready to let it go. No matter where you go from here, maintaining this relationship is important. You need the job now and may need the network later, especially if you are considering starting your own company in the same field.
So give your current position the attention it deserves when you are there. Do a great job for them. And then when you are not on their clock, you can be on yours. Keep the hours separate. Do not give into the temptation to answer one email or take a call from the bank if you aren’t on break or at lunch. It will wait. You can call them back on the way home from work, that evening or the following morning before you go into the office.
By the same token, don’t try to use that office to do business before or after your normal working hours either. It can create creep – you will think it is okay to use their copier “just this once” or use their computer to track a shipment. It is blurring an ethical line and you need to remain ethical. It would be hard to explain later if your boss found out and emotions were running high. Starting a new business is a marathon, not a sprint.
Scale Back and Save
One thing that cannot wait is to start saving. You may need capital for your business. You are surely going to require living expenses. To go forward at all with your dream, this has to start now. Even if you aren’t sure what field or business you are going to pursue, if you are serious about becoming your own Man, start now.
At a minimum, you should save six months to a year of living expenses before you commit to your business full-time and give up your current position. I heard that sharp intake of breath, and yes, I do have some idea of how much that is.
However, it is imperative that you do so. That is going to be your new safety net during slow sales periods and unexpected expenses. You will reduce a source of significant amount of stress even before you start. One of the top 10 reasons that start-ups fail is because the owner did not plan for the unexpected. Don’t be that guy. So until you have it, you need to stay at your current job until you launch.
If you start your new business before you leave your current position and moonlight (split time between the two), then you should stay employed until your new venture generates at least thirty percent of your current salary. That means if you make $100,000 a year right now, when your business clears $33,000 profit (not sales), you can start looking at jumping ship.
Whichever method you elect to use, learn to live lean for a while. If you are saving, the sooner you save that money, the sooner you can leave your job and head out on your own. If you have started already, even if you are making a third of your current salary in profit, the income stream will fluctuate. Try not to overcommit in either your personal or professional finances.
Can you do this and keep your full time job too? Don’t just say “yes” and move on. It’s an important question. You have to give your all eight hours a day or more, five days a week to someone else’s business. Then you have to come home and have the discipline to put in more time on YOUR business. This means sacrifice. It means being stronger than the pull of a favorite television show, a cold beer or a hot bath.
Time. Time is going to be your biggest problem. There are only so many hours in the day. You need to eat and sleep. With what time you do have, you have to find ways to make it count. This means finding ways to eliminate distractions to free up your time. Some things you can do are:
Set home business hours. Let your family know during that time, you are unavailable for anything but the most grave of emergencies.
Check email twice a day. Do it in the morning or at night, mid-morning and mid-afternoon, right after breakfast and dinner – whatever works for you.
Do what is going to take your business forward, that is, that which offers the most value. Spending two hours prioritizing your to-do list is a waste of time. What could you have gotten done on your to-do list in the time?
Learn to be effective, not efficient. Efficiency will come later. Right now the important thing is to get things done. When they become repeat tasks, then you can worry about how to do them better. For now, just get them done!
No matter how much you plan, success takes time. “Overnight” successes are a myth. Be prepared to work a long time for very little to get where you want to be.
Money. This is next biggest obstacle. You will need capital to fund your business and you need money for your personal expenses. These are two separate things and need to be addressed that way. You may be making a personal financial investment in your company and that’s great – a lot of start-ups are self-funded to start. Make sure you keep track of it correctly. Get an accountant if you need to. A running register in your head is not reliable.
If you are going for external funding sources, we will cover that in more detail later in this book. For now, just remember to keep the pots separate.
Family. They will be both your biggest supporters and biggest detractors. There is nothing family and friends to pick you up when you are down. There will be days when you will be downtrodden, wondering why you started this thing, and not sure you should continue. They will push you, encourage you, and stand beside you through it all.
But they will also pull at you to spend time with them. Your son wants you to come play catch, the spouse wants to take a weekend off and go somewhere. Everyone in your house will complain that you aren’t home enough. They will knock at your door during office hours to ask what you think of this outfit or ask for help with homework.
If you are single with no kids, don’t think you are immune to this. Mother will call and want some help around the yard. Dad will think it looks like a great day to go fishing. Friends, sisters, brothers – they will tell your presence is required at some event or another. This is a given – you will feel torn between being with them now and doing what you think you need to for a good future.
Find the balance. A ten minute break to play catch or have a cup of team isn’t going to set you back years on your timetable. Take a day and go to a football game with your dad. Doing those things is absolutely okay. Sometimes it takes a bit of downtime to recharge and come back at it full throttle. But do it too often and it might delay you by days or weeks.
Discipline. This is a topic we will come back to in every section of this book. The only person that can make this happen for you is YOU. You have to set rules for yourself and follow them. You need to say no to distractions, make reasonable decisions and manage your time. No one can or will do it for you. You control everything in your start-up, including yourself. By exercising discipline, self-control and level-headed thinking, you set the example for its culture and become the role model for your partners and employees, if you have any.
Now that we are all at the same point, we will talk about what it takes to get a new venture ready, what it takes to keep it running and finally, how to plan to leave it behind if you want. It’s a lot of information in a little time but you can handle it.
(Maybe expand on this opening?)
Do You Have What It Takes To Be The Man?
I’m not talking about the financial resources or brilliant idea. Those are important, obviously, but becoming an entrepreneur takes much more than that. Starting a business today is just as complicated as ever, just maybe in different ways than fifty years ago, or twenty years ago or even five years ago. Business is dynamic. The real question is: do you have what it takes to fight the tide, ride the waves and take command?
Motivation. Do you do things because you simply know they must be done? Or do you tend to take action after someone else points out what needs doing? If you don’t act on your own and take initiative, your business is not going to succeed. Let’s just be straight up on that. You are the boss, you are the captain, you lead the charge. You have to be capable of motivating yourself and those around you in this undertaking. If you know you won’t be able to do it, then don’t bother wasting your time or money.
Confidence. Do you feel like you can do anything? Have you presented and stood up for your business idea in the face of nonbelievers and doubters? Running your own business takes a deep-rooted faith in the product or service and your ability to deliver it to customers who want it and not worry about those who are less interested. There will be adversity and challenges coming at you from all directions. They can take the form of competition, time, money, paperwork, red tape, changing market conditions and much more than I can even think of to name here. They will have the very real capability to make you fail unless you have the confidence to deal with them and move forward.
The Ability To Listen. The best business leaders listen. They listen to their colleagues, their employees and their customers. They really truly hear what they have to say and then evaluate it. No one knows everything but collective knowledge can make you stronger and move mountains of challenges and detractors out of the way. Taking advice is the mark of a good leader too and a smart businessperson – it starts out as free and turns into money for you. What’s wrong with that?
Self-evaluation. Do you know your strengths and weaknesses? Are you honest with yourself about what they are? You want to make the most of your strengths while addressing the weaknesses. That doesn’t mean you have to turn your weaknesses around. But know what they are. Things will get tough – they do for every business – and when that happens, you have to take action. Do you have the discipline and will power to assess and mitigate risk through decision making and quick thinking?
Be realistic. After the self-evaluation, a reality check is probably the most important thing you can do before deciding to start a business. Are there more positives to starting this than negatives? Do you have the support of family and friends? Do you have the knowledge about the product or service you want to offer? Are you sure there is a market for it? Do you have the resources you need or can you get them?
Dreams do become reality but it takes a lot of hard work and perseverance. No matter how hard you think it will be to start your business, it is going to be harder. Don’t let bumps in the road take you off course; learn from them and do business better. Make decisions better. All of this will lead you to successfully running your start up business. You can do it!
Intentions are not goals. They are broader concepts that point you in the direction that you want to go and help define how you are going to accomplish the goals, small and large, that you set for your new business. There are no specific milestones or endpoints when it comes to establishing intentions. Goals tend to be more explicit, such as a sales figure per quarter or number of pieces sold. Instead, intentions are softer, more encompassing, and give you flexibility on how you meet them.
Make a list of your intentions. It might look something like this:
I intend to work at least two hours a day on my new business, no matter what else is going on that day.
I intend to save money to live on, starting now, so I can pursue my dream.
I intend to keep spending time with my family and schedule around that time.
I intend to leave my day job at my day job (if you are working for someone else while doing this.)
Start small and build. When you first start working on your new business, your passion and excitement is going to fuel you to think about it constantly and put in long days. Your mind and body can only do that for so long before fatigue sits in. The great strides you make early on may be offset by steps backward when you finally give in and have to recharge.
Try to not to dive headfirst into a schedule that you cannot maintain. If this is the only thing you are doing, then maybe you can go crazy right away. But if you are balancing anything else with this – another position, family obligations, whatever – be reasonable with yourself and your expectations. Try to establish a schedule that makes you feel as if you are moving closer to your goals while still meeting ongoing expectations. It will help you keep the stress level to a minimum, maintain work-life balance and give your head a chance to clear.
Goals. When discussing intentions earlier, I didn’t mean to imply that they should replace goals or that goals are not important. They are. They play a huge role in strategizing and execution. You still need to have goals. The more specific, the better. Just also remember they have to be SMART.
S – Specific. Exact goals have a better chance of getting accomplished that those goals that are vague and weak. You need to know exactly what you are shooting for. Answer the six “W” questions to develop a solid specific goal.
Who is involved?
What do I want to achieve?
When do I want it done by?
Where is it going to happen?
Which items do I need to get or consider?
Why is this an important goal?
M – Measurable. The best goals have ways for you to mark your progress. You want to be able to see you are making headway. It will help you see success and give you hope and pride on those days when you really need it. The term “milestones” frequently refers to those benchmarks from the start of your effort along the way to end of it. Think of them as landings between floors when traveling up a staircase. To identify those landings, there are some questions you can ask yourself. How much of any one thing makes up the goal? How many will get you to your goal? Divide that into manageable parts. The important thing is to know when your goal will be accomplished as the starting point.
A – Attainable. When you know what you want, you start figuring out ways to get it. You want a successful business. By desiring it so badly, you automatically started to think about what you can do it to get it. You begin to develop the ideas, attitudes and skills you need to make it happen. You start thinking about physical resources, such as capital and location, and start planning how to get it. Even the goal that seems the most out of reach becomes more attainable and accessibly the more you do to try to reach it.
R – Realistic. You may want to run a company that takes people into space. That’s a lofty goal, pardon the pun. Do you know anything about space? Flying? Engineering? Maybe you have those skills, maybe you don’t. To be realistic, a goal has to be something that you are able to do and are willing to put the effort in to attain. That doesn’t mean you shouldn’t set the bar high. The higher the goal, the more motivation you will have to achieve it. Studies have shown that low goals = low enthusiasm. Stimulate your drive and dare to dream.
T – Timely. You have to establish how long you need, and how long you will give yourself, to meet your goals. That is not always the same thing. You may only need 3 days to write your business plan, but if you have other obligations, it is going to take longer than that. Three days, at eight hours per day, is twenty-four hours to draft your business plan. But if you can only give it two hours a day, five days a week that means instead of 3 days, you need to give yourself 3 weeks to hit that mark. And that’s okay. Go back to “Realistic”. If you make unreasonable demands on your time, you will burn out and start to think you are failing.
SMART goal setting is a concept that has been around for a long time. You may be tempted to think it has outlived its usefulness and there are new and better ways to set goals. You may be right – do what works for you. But remember the wheel is an old concept that has been around for a long time too, and it is still as effective as ever. In the absence of anything else, start with SMART.
Family time. Do not cut yourself short on this. Less is not lazy. Use your time on what’s important to make time for what’s important. The age of working hard for 40 or 50 years to the exclusion of all else so you can take it easy the last 10 or 20 years of your life is over. Take the little things while you can and while you are young or fit enough to enjoy them.
Keep commitments with your family and friends. Make plans to do something together. Take 15 minutes to play catch with your son or an evening to go to your daughter’s dance recital. Fish for a day with Dad. Go to Vegas on a long weekend with your friends. It’s okay.
Having a work-life balance should be one of the good things about being your own boss. It is an oxymoron of professional business life that we are far more comfortable asking for time off from someone else than just giving it to ourselves. You are the boss; just say yes.
But in order to do such a thing, you have to make the most of your time that you set aside for your business. This means (another oldie but goodie here) working smarter, not harder. Limit distractions. Discipline yourself to give 100% for that time frame, whether it is two hours at the end of the day or a full weekend. Tell your family only to interrupt you for the direst of emergencies. Protect that time like a dragon over a hoard of gold.
“Such a simple concept, yet so true: that which we manifest is before us; we are the creators of our own destiny. Be it through intention or ignorance, our successes and our failures have been brought on by none other than ourselves.” – Garth Stein, The Art of Racing in the Rain
Pick The Right Business
Sometimes what you are good at might not be where your heart is at. It is like trying to answer the question “What do you want to be when you grow up?” I still don’t know the answer to that question. What I do know is that I love what I am doing. That is the first element to picking the right business: find something you truly love to do.
Once you know that, the next step is to make sure it is a viable business. Reality does have to set in somewhere. I love to sing in the shower or in my car to the radio but that is the only place I sound good. Making it big as a pop star or trying out for “America’s Got Talent” isn’t going to make my dreams come true, no matter how hard I practice singing.
There are also things you might enjoy doing that don’t make money or at least not the kind of money you want. If you love woodworking, but it takes a week to make a piece that you will only clear $200 on when you sell it on a social media page, is that a business model that can support your lifestyle? Maybe, maybe not. But take that same passion, apply it to designing pieces and have them mass produced? You may have something there.
Evaluate product vs service. So where is your heart at? Have you invented something that will revolutionize life as we know it? And I don’t mean that sarcastically either. Martin Cooper changed the world when he made the first cell phone call more than forty years ago. Before that, King Gillette did with the first disposable safety razor in 1901 and Marion Donovan did with the disposable diaper in the 1970s. They were just trying to come up with something that made life easier and ended up having great success. But they started off in the world just like you.
Maybe you do not have a product to sell but a service to offer.
Marketplace. Whatever your offering is, you need to make sure you gain and maintain a keen understanding of the marketplace in which you will conduct business.
Keep track of ideas.
Business Plans and Projections
Business plans are the tool that makes you put pen to paper and plan the transition from where you are now to where you want to be. There are varying opinions on whether or not business plans are worth the time and effort.
They are. Just do it.
The exercise of coming up with everything will enlighten you. You will think of things that you may not otherwise have had occasion to do and reduce the number of things that can surprise you as you embark on this journey. You need to know what makes you feel uncomfortable, what you think you have a good grasp on, and what obstacle lie ahead that you may not have any idea how to deal with right now. But identifying them is a good start.
It is also great for your confidence. A start up is a scary thing. You are putting everything on the line in the hopes that enough people out there like your product or service enough to purchase it, talk about it with their friends and create a snowball effect that turns your idea into a profitable reality. A business plan becomes your backbone in times of need and doubt.
Business plans are made up of six to eight sections, depending on how you organize it. For instance, you can see in the list below that marketing is addressed in two areas. However, you can address it in one section, break it out further, or even make a separate marketing plan.
Organization and Management
Marketing and Sales Strategy
Service or Product Line
Be sure you research every aspect of your plan thoroughly. A business plan that works for you now, and later, is much like a thousand piece jigsaw puzzle. You need to have a clear vision of the big picture but it’s the little odd pieces that give it structure and life. You need to know all those puzzle pieces – details – to start to put it together and have it make sense.
Let’s go into the specifics of each section a little bit more.
Executive Summary. The executive summary can be a brief paragraph or it can be as long as a couple of pages. It should summarize the rest of the plan in a concise and compelling manner, so that the reader wants to keep reading for more detail. At a minimum, it should introduce your company, why you think it will succeed, your product or service, and your future goals for it.
Elements that are commonly part of the Executive Summary include:
Business start date
Location of the business
Key management personnel and their roles in the organization
Number of employees and roles
Product or services
Description of the facility
Important financial information or needs
Accomplishments that indicate venture success
Plan for the future
This is just a summary so each of these should be brief. They can be presented in bullet format for easy reading. The goal is to give the reader a taste of what’s to come. If you are new to the business arena and do not have a lot of the information above, then use this opportunity to talk about your background, experience and why you started the business. Talk about how you will be different from the competition and how it fills a need for the consumer that will translate into the venture’s success.
Marketing Analysis. This is the normally the second part of your business plan. Even if you are going to draft a separate marketing plan, there are important elements to be included here. This section should include a description of your chosen industry, identify your target market, provide facts and information about market test results, lay out timeframes and results of a competition evaluation. Basically, this is your chance to show that you know the industry in which you are going to operate your business and basic facts and statistics about any market research you have conducted.
The Industry Description length and content depends on the size and scope of the field and profession you are in. It needs to answer questions like:
What is the expected growth rate?
What is the current industry size?
What are relevant market trends that support your business?
What are the major customer groups?
What is the target market?
Answering the target market question will take up a significant portion of this section. It is very important information. The term “target market” is defined as “the customer base in which a product or service will be supplied and used”. Make sure your market size is realistic. Just because there are 7 billion people on the planet does not mean everyone will use your product. Many startup failures happen because businesses start to think they have to have something for everybody. Do not fall victim to that conceit. You know your product and who will use it. The Marketing Analysis, conducted correctly, will show you where those people are and how to get the product or service to them.
Include a segment describing the key characteristics of the primary target group. What are their critical needs? How are those needs being met now and what you will do to meet them better? Where are thy located? Is there a cycle to their need and your ability to meet it? Detail the demographics of the group. Are they children? 18 – 49 years of age? What is the best demographic breakdown to describe your group? College kids? Young adults? Young families with parents under the age of 40 with at least two children? Demographics vary by industry so learn how your industry judges theirs.
Also explain the size of the target market. This should cover number of potential customers, how much they buy right now of product like your offering and how much that is expected to grow. Then state how much of the market share you anticipate having. Explain how you arrived at that number. This is one of the most enlightening aspects for you as the business owner when writing this plan. If you need to sell 2,500 widgets to break even, and your market analysis shows only 800 potential customers in your target market demographic, you may need to relook at your model.
Pricing is an important part of the marketing analysis. How much do your competitors charge? How much are you going to charge? How did you arrive at this figure? What is your profit margin? Are you going to offer coupons or discounts? This is a good time to think about how you are going to structure your pricing. Establish your price per item and in bulk. Think of what you can do for package deals if you are offering services. If a customer pays promptly, are you going to offer a discount?
List your sources for your information. No, your gut cannot be one of them. While educated guesses are par for the course in business, unless you have a stellar and successful track record behind you, make sure you have a legitimate source for everything you discuss in your plan.
This is also a good time to introduce advertising and what media you are going to use to do so. Social media, radio, traditional advertising, adverts on college corkboards, whatever it is. Just tell the reader how you are going to reach your potential target market.
Finally, address buying patterns and trends. Market research should turn up traceable routes in spending and procurement. Much like back to school and the holidays spark peaks in consumer spending, your industry probably has something like that too. Find it and explain it, and then be ready to meet it.
A word of caution – this section should have some detail but put actual results of surveys and the like in an Appendix at the end of your plan. Not everyone reading your plan will have knowledge or patience to read through all of that and you want to keep the reader’s attention and interest. Heck, you want to keep your own. Keep that supporting documentation at the end, where you can find it is you need it, and those that may want that level of detail (financing institutions or investors for example) can find it too.
The Marketing Analysis is also where you demonstrate that you are cognizant of your competitors and any potential challenges or obstacles. Commonly called a SWOT analysis ( Strengths, Weaknesses, Opportunities and Threats), it describes an in-depth analysis of your competition. What are their product lines and market segment? Based on this information, you can determine how your company stands against the competition, potential relationships and differences and how it affects your entry into the marketplace.
The key is to identify your competitive advantage and talk it up. Show you know it inside and out, how it can be used and how you are going to get it out into the world successfully.
Company Description. The Company Description is just that – an explanation of what your company is, how it is made up, and how it will succeed. This is a good place to detail the components that make up your business and how they relate to one another. Show where they overlap and how that overlap/teamwork helps you succeed. List any other fundamentals of the business that you think apply. This can continue the conversation of what you think is your competitive advantage from the Marketing Analysis. It may be your location, your personnel or your ability to deliver faster than anyone else. Whatever it is, state it here, even if you are repeating it.
Organization and Management. This is where you lay out what your management team looks like and how you are organized. At the very least, you need an organizational chart with names and roles or job titles on it. Go one better by providing a narrative description about the chart. Explain who does what and who answers to whom. This makes a great start to an employee orientation if needed too.
But take advantage of the opportunity to profile key management and share their experience that will make this venture successful or their already proven track record of success. This is your chance to show investors, partners, or other stakeholders in your company that you have a comprehensive management plan and the right people in place to make your business a success.
Many business plans insert the resumes of their management team here. These give details like:
Title (description with primary duties)
Past employment or businesses
Industry recognition (if any)
Quantify anything you can. If the person is has managed people, say something like “Supervised 15 direct report personnel” instead of “management experience” or “Increased sales by 15% in first year” versus “Improved sales”. The more specific you can be, the more confidence building that fact will be.
This is also the place to explain the legal structure of your business. Are you a sole proprietor? Did you elect to become a corporation? Explain it in this section. State who the owners are, you and any others, what ownership percentage each has, and their role in day to day operations if any. As a corporation, there may be different ownership types, like preferred stock, warrants, options and common stock.
Marketing and Sales Strategies. Yes, marketing again. It will be constant topic in your startup, even years down the road. You have no product if you have no buyer. You have paperweights. Marketing gets the word out to your target market, which generates leads, which then turn into sales. You have to know how you are going to make that happen.
Your marketing strategy should have four core elements:
Market penetration. Market penetration is the percentage of sales volume your company has in relation to the entire market. So you sell 25 out of 100 total in the market, you have a 25% market penetration, or market share. This strategy should tell the reader how you are going to do that, via price adjustments, promotion, improvements or more.
Growth strategy. Maybe you are going to grow by opening more businesses, acquiring competitors, franchising, increasing resources or by offering your product or service to different users.
Channels of distribution. This tells the reader how the product is going to reach the consumer. This can consist of your sales force, equipment manufacturers, retailers, licensees and other methods of distribution.
Communication. This is how you are going to reach your customer so they know to look for your product. It can be over the airwaves, print like newspapers, social media, websites, brochures or public relations.
Once you have set your marketing strategy, you can use it to determine and lead into your sales strategy.
Your sales strategy consists to two main parts:
Sales force strategy. If you are going to have people out there selling your product for you, are they going to be employees or independent contractors? How many do you need and how will you train them? That’s what this part is all about.
Sales activities. Behind every bit of luck, there is an element of science. You may not realize that there is a science to sales. You need to start by identifying prospects. From there, how many are real leads? Prioritize them by perceived real potential to buy. Then, determine how many calls you will make over a period of time, the average number of calls to get an order and how much, on average, each customer will order. That can be in volume or in dollar amount.
Breaking down these figures will help you figure out what you really need to do and how to do it. It will also give the reader and potential investor confidence as well.
Service or Product Line. This is the part where you get to talk about what you are selling. This isn’t an inventory rundown. Focus on giving the reader evidence that you have a wonderful product and list all the benefits and features that it provides your target market.
Describe the product or service and then detail the need it addresses. What does it solve? What does it make easier? What is new and innovative about it? If you have any promotional materials ready, you can list or provide them here. They might be better in the Appendix though; that’s your call once you see your finished business plan.
Tell the reader relevant information about suppliers, availability of needed resources, and any cost factors that should be considered. You can include your product or service price, price of materials – anything that pertains to the service or product line.
Talk about the life cycle of your product. What factors may influence it? When, where and why it is cyclical, if it is, and if is not, then describe the constant demand and your ability to meet it. You can also talk about the research and development you have done or that you are doing to prepare for upcoming life cycle moments, product improvements or product spin-offs that may grow your service or product line in the future.
Finally, address if there are trademark or copyright requirements. If there are, what you have done to meet those? If it needs a patent, has it been filed? Do you have it back? What is the patent number? The important thing is to reassure the reader (i.e. possible investors) that you have taken steps to protect it.
Funding Request. If you are building your business plan to attract investors or look for a credit line, this is where you tell the reader how much you want and why. You may need to provide levels of funding. Think of it as best and worst case scenarios. Tell the reader how much you can do with 100% of your requested funding and then scale down to what you can do at various lower percentages.
Detail your current funding needs, what you will need over the next three to five years, and how you will use those funds. These are critical data points so be sure you are detailed, positive and optimistic. Also address long term plans and how they may affect the funding picture down the road. Anything you propose in your funding request will have to be backed up with financial statements in the next section.
When identifying your funding requirements, also specify what type of funding you are looking for, such as equity or debt, and the applicable terms that you should like to see – length of time and interest rates, to name a couple. You won’t know what they will agree to until you ask and this sets the stage for negotiation if necessary. Be open to those discussions and fair when participating in them. As John Paul Getty famously stated, quoting his father, “You must never try to make all the money that's in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won't have many deals."
Explaining how you will spend the capital is as important, if not more, than how you are asking for it. Is for expenditures, like equipment, or working capital to pay for operations? What about paying off current debts if you are revisiting an existing plan for new funds? Whatever your reason is for asking for money, make sure you state it clearly and honestly.
Finally, explain how you are going to pay it back. State if you are going to go public, leverage a buyout, sell your company or anything that else that affects the financial status of your company. A creditor is going to want to know how they are going to get their money back, and any profit margin, before they agree to fund your enterprise.
Financials. Financials include documents and reports like income statement, balance sheets and cash flow statements. If you are established, creditors are going to want to see them for the last three to five years, or whatever period of time you have been in business.
If you do not have them because you are a startup looking for funding, that is okay. You will need to create projected ones for at least years one, two, three and five. This is called prospective financial data, or projections. You will need to provide a narrative on what assumptions you used to create those projections, the facts those assumptions are rooted in and how you arrived at them.
Make sure the financial reports MATCH your funding requests. Any inconsistencies can result in a disapproval. A creditor is going to be on the lookout for something that puts his or her money at risk. The confidence is in the details and how well they coincide with one another. It is like showing your elementary math teacher how you got the answer – “show your work”. This is how you do that in the business world.
Any other data you can provide here is icing on the cake. Research and calculate the ratios that financial institutions use to determine lend-ability and provide those. Include graphs and charts of current trends, historical data or industry success factors if you have them. The more confidence you can inspire about yourself and your product, the more likely you are to get approved.
Appendix. Not every plan needs an appendix. Sometimes there are things that you would like to include in your plan and you are not sure where to put them. It could be because they don’t fit neatly into a section but usually it is because they will detract from the point you are trying to make in Marketing Analysis or Service or Product Line.
A list of items that could be included in an appendix are:
Details of market studies and surveys
Licenses, permits or certifications
Patent or copyright proof
Business or reference points of contact
Chances are, as you draft this plan, you are going to find things that you didn’t consider or discover that you didn’t think all the way through. This is normal and a huge reason that a business plan is necessary, even if you never approach a bank or investor for money. You need to know what you don’t know. Issues that are commonly uncovered in the draft of business plan are things like:
Lead time to get your idea off the ground
The true, and sometimes high, cost of start up
How technology affects you
Personnel – how many and how skilled
Unfamiliarity with your product
Possible intellectual property needs or problems
Rules and regulations
These are huge consideration that impact your business that in your excitement and passion to move forward, you may not have thought about. Make sure every issue that comes up in the formation of your business plan is researched, dealt with, planned for or remedied. In the most extreme circumstances, recognize when it means that what you want to do is just not viable. Failing is okay but knowing you are going to and doing it anyway is an act of insanity.
Now that you’ve written your business plan, revisit it every six months, certainly no longer than every year. This is your roadmap but just like there is highway construction, there will also be detours along the way to your destination. They may be unexpected, known about far enough in advance to plan or you may have discovered a new and better route to where you are going. Whatever it is, it is going to affect what you think the plan is right now, so adjust fire to succeed.
Marketing is going to be a major function of running your start-up. You should know this just from the amount of space it took up in your business plan. It doesn’t matter how great your product is, if no one knows about it, no one will be able to buy it. No sales equals no business so be prepared to learn to market or hire someone who does.
The age of the internet has made this both far easier and far more complicated than in the past. While the web offers many free ways to market, navigation is a bit more complicated than the old days of a newspaper ad and mass postcard mailing in your target audience’s zip code. Not that those options do not still have a place in today’s advertising strategy, depending on your offering.
Before you can go too far down the marketing path, there are some things you need to establish. Naming a product, giving it a logo and a brand, determining copyrights and setting up a website of the four critical corner foundational elements of a marketing plan.
Name. Whatever you name your product, service or business, recognize that the name is important. Struggle over it as you would the name of your child – it is that important. This is how it will be known for the rest of its life cycle. It will affect marketing, logo, branding, copyrights, and more. This is a big deal and the first major decision of many as the owner of a start-up.
First and foremost, you want it to be smart and functional. In a word or two, it should relay what it is and how to use it. Being clever is not the most important thing here. You want to stand out but not so far out you are unrecognizable to your target audience and market.
Secondly, it should represent how you want to be seen. A law practice should sound reputable or a bar should sound like a lot of fun. Social media sites have this down to a science, as do app developers and other IT start-ups. Facebook may not sound like what it is but it makes someone want to find out. So does “Angry Birds”.
You can name your business for its origin. Maybe it is influenced by the location in which you are going to open and operate. You can name it after yourself, a role model, a child, whatever strikes you as appropriate.
Finally, this is not a decision to be rushed. The title is often the last thing an author decides on after writing an 80,000 word novel. Others know it when they start and even more stumble across the perfect title while writing it. You never know what will finally make the light bulb go off but when you settle on the right name, you will know it like you know you’ve been struck by lightning.
Logo. This is the face of your product. Think about all the logos that instantly bring to mind what it is selling. Facebook, Apple, Pepsi, McDonald’s, Ford – these all have logos that bring instant brand awareness. We are aware of thousands of these in our daily lives – there are even mobile games built around identifying logos!
Designing your logo can be fun and you should have fun with it. You can use the internet to come up with ideas and templates or hire a graphic designer to help you with it. It is the worth the time, effort and money to have the perfect logo so do not feel like you need to rush it. It will be worth it in the end.
You know your business best so you know the image and feelings you want the logo to inspire. If you do hire a graphic designer, use their experience and techniques. They may find ways to include deeper meanings and other intangible elements into the logo that will resonate with your audience.
Try to keep it simple and eye-catching. The best logos are just that. If it too complex or “busy”, you may lose your potential customer. They do not want to have to work to figure it out in this age of instant gratification and constant movement.
Come up with a few samples and see what jumps out at you. Check with family and friends – your beta or test group – and see what they think and elicit their feedback. It has to serve its purpose while being innovative, unique and easy to remember.
Once you’ve settled on a logo, you are going to need it is different file formats for print and online. If you can do that yourself, great, but be prepared to bring in a designer that can tweak the final design for all of your needs in the future.
Patent, Copyright, Trademark (Bond?)
Combine old and new ways – diversify your marketing
Make sure you check zoning requirements for your business location. Most home-based or small businesses don’t need much, just a business permit obtained from the state or provincial level. But you never know so it is good to check. Operating in a zone unapproved for the activity can lead some large fines and you don’t want to have your start-up held up unnecessarily. A simple phone call to your local town or county clerk of courts will save you a lot of headache later.
If you are looking at starting a larger operation, such as manufacturing or an IT firm with lots of employees, chances are that your city has set aside an area already zoned for activity like that, like an industrial or office park. You may still have to fill out a permit or license but zoning is taken care of in your choice of location.
Finally, if you are working or have worked for someone else in your start-up field, make sure your service or product is not anything that your employer can claim they own. Many companies have clauses in their employment contracts or new hire paperwork that says one or both of these things:
If you developed the idea or product on their time while working for them, they own it. This is especially true in the research and development field. This may be an issue if your creation is close to or an offshoot from what you were working on while employed.
A do not compete clause. This can say that you will not work for anyone else in the same field or that you will not do business in the same area or within a certain number of square miles for a period of time after leaving their employ.
This is going to be a long haul. Make sure you are up for it.
Eliminate distractions to free up time. Learn to be effective, not efficient.
Less is not lazy. Use your time on what’s important to make time for what’s important.
Yourself, family, employer, customers…..