Consider the following when developing your business plan.
2. Tell how you will make the good or service. Determine whether it is technically feasible (practical or doable).
DREAM IT - what would the product or service look like if it were completely successful?
Hint: You can also refer to this dream concept as a Vision Statement. Write a short statement about how this product or service will be beneficial to your customers.
DESIGN IT - good planning is clear organized thinking. What action steps or strategies will be used?
How will you make the product or service?
Hint: You can determine whether it is practical or doable by conducting marketing research. Outline how you will make the product or service by listing things that you will need to make the product or service into a finished good.
Where will you get the money or investments to make the product or service?
Hint: An investment means to engage in any activity in which money is put at risk for the purpose of making a profit and which is characterized by some or most of the following: sufficient research has been conducted, the odds are favorable for making money, emotions such as greed and fear play no role, and the activity is ongoing and done as part of a long-term plan.
What expertise do you possess that will make the product or service successful?
Hint: Compile a list of qualities that you have that will contribute to the success of your product or service.
Do you foresee any barriers that stand in your way? If so, how will you overcome the barrier?
Hint: Take a sheet or paper and divide it into two columns. Label the columns and list all pros and cons of your product or service. Then include several statements on how you will handle the pros and cons.
3. Determine how you can make enough of the good or provide enough of the service to meet your business goals. Explain how you will accomplish this.
DELIVER IT - good planning is good organized clear thinking. The following are a few questions to consider when developing this part of the plan:
How can I best use my resources?
Hint: A resource is a person, asset (item of value that could easily be converted to cash), material or capital (cash or goods used to generate income) which can be used to accomplish a goal. This would be a good time to develop your priorities and write down what is most important in helping your product or service become a success. For example, investors (mom or dad), money that you have saved, equipment such as a lawn mower, computer etc.
What are the specific action steps needed?
Hint: This step is where you explain how you plan to promote or sell the good or service, define who your customers are and how you will reach them.
How will you ensure that you will remain committed until the results desired are achieved?
Hint: This would be a good time to explain how passionate you are about this product or service. If investors know that you are dedicated to the success of your idea, they will be more likely to back your plan up. Write a short paragraph about your knowledge, love and desire to achieve your stated goal.
4. Identify and describe the potential liability risks of your good or service.
When deciding whether to pursue your business plan you should analyze your risk and liabilities.
A risk is the likelihood of a loss or less than expected return on your good or service.
Hint: This analysis can be determined by how much money can be made after you subtract your expenses to make your product or deliver your service. A good way to analyze your risk is to conduct a forecast. A forecast is an estimate of future trends by examining available information on your customer's intention about your product or service.
A liability is a financial debt, obligation or potential loss.
Hint: A liability or obligation can be in the form of a loan owed to another person or persons and required to be paid by a specified date.
5. Determine what type of license you might need in order to sell or to make your good or service.
Licensing and/or Incorporating
Permission to engage in a certain activity. For example, if you invented a new product you would need to apply for a patent to make sure that the product does not already exist. The following are examples:
- Patent - exclusive right granted by the government to make use of your invention or service for a specific period.
- Copyright - the exclusive right to make and dispose of copies of a literary, musical or artistic work.
- Corporation - this is the most common form of a business organization and one that describes the purpose of the business. By incorporating a business, it gives the business legal rights as an entity separate from its owners.
Hint: this example is not required by the business owner, however, it serves many great benefits. If you decide to operate your own business you may not necessarily have to have a license, but it is always a good idea to separate your business assets or property from your personal assets or property.
B. Market
A market is a public place where buyers and sellers make agreements to exchange goods or services for payment. In order for the market to be efficient or successful the good or service must reflect the true cost associated with providing the good or service.
Hint: If you owned and operated a lawn mowing business the price for you to mow a lawn must be in line with other competitors in the industry. If your prices were much higher than the normal, your service would not reflect the true cost associated with providing this service.
Questions to consider when determining your market:
1. How do I determine who my customers are? Identify the type of person who would buy your good or service.
Hint: Marketing research is a good start. After you have created your product or service, you can design a survey asking questions about your product or service. You can determine your potential customer base by collecting and analyzing information about how your customers will react to your product or service. By conducting research, you can gather information about groups of people characterized by age, income, sex, education and occupation. For example if you started a pet sitting business it would be counter productive to market to people who did not have pets.
The following are some questions you might find on a pet sitting survey:
- 1. Do you have pets?
- 2. Do you ever go out of town?
- 3. Where does your pet stay?
- 4. What is the cost of boarding your pet?
- 5. If possible would your prefer your pet stay in the luxury of their own home or yard while your out of town?
The above examples will help you determine your customers wants and needs.
Product or Service
2. Is my good or service unique?
Hint: A unique product or service is a condition in which a company can provide a product or service more efficiently and with higher quality than their competitors. This competitive advantage is something that you or your product can do better than similar product/services on the market.
3. How will I promote or sell my good or service?
Hint: You can promote your good or service through advertising. Advertising is a description or presentation of a product, idea or service in order to convince individuals to buy, support or approve of it.
Here are some suggestive techniques or campaigns:
- Design Flyers that describe the product/service and its cost.
- Door to Door sales
- Telesales or selling by phone
- Networking with family and friends to promote your product through word of mouth
C. Finances
1. Identify your product you are selling and look closely at all of its components, if there is more than one.
For example, if you are making rice krispie treats to sell at local garage sales you will need to know the cost of:
- Ingredients
- Packaging for food
If the ingredients and packaging cost $10.00 total but 20 rice krispie treats can be made with the ingredients and packaging, your prototype would cost $.50. ($10.00 divided by 20)
2. The selling price of your good is made up of the purchase price plus operating expenses plus profit:
Selling Price = Purchase Price + Operating Expenses + Profit
You determined the selling price in question # 1 above. Assistance is provided in question #6 to help you determine what your operating expenses are. The only other component needed to determine the selling price is the amount of profit you want to make. For example, if the purchase price (your cost to purchase or make your product) were $10.00 and your operating expenses associated with the product were $4.00 you know that your total cost to provide your product is $14.00. If you want to make a profit of 50%, you would sell your product for $21.00.
Selling Price = Purchase Price + Operating Expenses + Profit
$21.00 = $10.00 + $4.00 + $7.00
When determining your selling price, keep in mind that your price needs to be competitive with others in the same area selling a similar product. For example, if you were selling homemade rice krispie treats, your price would need to be competitive with rice krispie treats your potential customers could buy at the grocery or convenience store. You could not charge $10.00 per rice krispie treat and successfully sell many if they could be obtained in a grocery store for $2.00. When reaching your selling price you must cover your purchase price and operating expenses. How much profit you can add to make the selling price needs to be determined by the quality of your product in relation to others available that compete with yours. Survey prices of comparable products to help establish your price.
3. How effectively you Sell or market your good or service is one of the components that determine how much you will sell.
For example, rice krispie treats could be sold by knocking door to door in your local subdivision. The best time to maximize sales might be in early afternoon just as children are arriving home from school and their parent is ready to provide an afternoon snack. Another good location to sell this type of product would be at a ball field where there is a large amount of families. Keep in mind, that you would need permission from any public establishment before you could sale your product on their premise.
4. You will need to calculate how much money you will need to begin your business. When doing so, consider the following:
- Will you make or purchase the product after you have made the sale (taking advance orders) or will you sell the product on the spot.
- If you are selling it on the spot, you will need inventory and will need to calculate how much that initial inventory will be.
- Will you need to hire any other employees to assist you? If so, that initial expense will need to be calculated.
- Will you need to have cash on hand to be able to provide change to those purchasing your product?
Once you have determined the cost of the initial inventory you will need, any cash on hand to provide change, and any expense from hiring employees, add those together to determine the amount of initial money you will need to begin the business.
You will then need to define how you will obtain the money. Some of your options might be:
- Borrow from a bank, family member or friend
- Use your own savings
- Sell advance orders to customers and collect funds in advance
D. Personnel
1. How will I determine what part of the business to handle? Determine how your business responsibilities will fit into your schedule.
Hint: Refer back to your business plan and marketing research results. By determining the demand or the desire and ability of individuals to purchase your good or service will determine if you need additional help. This is a great opportunity to write down the qualifications you possess that will contribute to the success of your idea.
2. Determine whether you will need additional help to operate your business. If you will need additional help, describe the qualifications your helpers should have and what duties they will perform.
1. How long does it take to make or perform the product or service?
2. What is the demand and availability of the product or service? Alternatively, How many do you need to meet the demand?
3. Can you satisfy the need of the product or service alone?
4. Based on your schedule or required daily activities, do you have enough time to complete project?
What types of Qualifications are needed for this project?
Hint: Qualification is meeting the necessary requirements to achieve a given objective.
Qualifications to consider:
1. Skills related to the product or service.
2. Reliability of the individual to accomplish the business goal.
3. Commitment of the individual to be dedicated to the product or service
4. Knowledge of the product or service.
