New year, New ideas!
It’s hard to believe we are already one full month into the new year. The dawning of a new year generally energizes thousands of aspiring entrepreneurs. At the Small Business Development Center, we often see a spike in new clients looking for help exploring their business ideas. While the ideas may be new, the approach to evaluate ideas is not. There are hundreds of sample business plans and templates available, yet the best advice is to keep it simple. Determine the size of the target market, evaluate competitors, and detail the prospective competitive advantage. This advantage is the reason for your existence in the marketplace and defines your niche. This is why you will sell enough product or service to generate profits. A clearly articulated competitive advantage drives marketing strategy and is the focal point of communication to targeted customers. Market analysis and strategy are the heart of a business plan. A majority of business failures can be traced to inadequate market planning.
A market analysis should provide a reasonable range for revenue projections. Yet, without a sound cost analysis, project feasibility remains undetermined. Perhaps the most straightforward task associated with business planning is to develop a list of start-up and ongoing costs. While the task is not difficult, it is time-consuming. The pain of crunching these numbers is well worth the effort. Organizational expenses, permits, deposits and insurance costs are often overlooked. In addition to location expenses, and direct expenses (product and labor), be sure to include a contingency allowance for completely unplanned needs. Minimally, the contingency allowance should cover overhead for 3 months. Once a thorough job costing is completed, a cash flow projection can be developed, which melds revenue projections (from the market analysis) with cost estimates to determine expected breakeven points and project feasibility. A cash flow projection is the bottom line of a business plan and it is the analysis most sought after by investors.
Not surprisingly, a cash flow projection and market analysis are the main components of a business plan. The Small Business Development Center at Jamestown Community College has experienced advisors to help develop and evaluate your business plan. The Cost Worksheet and Business Planning Guide linked here can help get you started, but we recommend a personal consultation with an advisor. One-to-one consultations are available at no charge, and bring a host of advantages to your project including access to several market research databases, a web-based planning tool, and networking groups.
Best wishes for much success in 2018 from the Small Business Development Center at Jamestown Community College.