Today, people expect more than just a decent paycheck at the end of a 40+ hour work week. They want to feel that their work and effort is valued and is truly contributing to the growth and success of a company, and they want to be recognized for a job well done.
So, when an employee isn’t satisfied with their work environment, it’s no surprise that some of them decide to opt for the more exciting small business route. In fact, some entrepreneurs claim they’d rather work 20 hours a day for themselves instead of working 8 for someone else.
Being your own boss does sound really appealing, but you’re also choosing to carry 100% of the responsibility, which can be quite intimidating, especially if you’re unprepared.
According to a study, 50% of small businesses fail within the first five years. It’s a rather drastic stat, and yet people react to it differently: some get scared, others see a challenge. The truth is, there are many factors that will determine your company’s success or failure. Recognizing what’s in your control will give you the upper hand and help you prioritize and focus on activities that will make a difference.
When you’re starting a business, the first thing you should do is create your small business plan. If done well, it will be a powerful foundation that will make every future decision easier, relevant and more effective. Let’s focus on the key steps you’ll need to take in order to create an impactful small business plan.
- Company description
- Product/service description
- Market and competitor research
- Organizational structure, team, and core processes
- Marketing and sales strategy
- Give your financial plan
Prepare your retail business for tomorrow
2020 accelerated many shifts in the retail industry—is your business ready to adapt to more? Get our free guide for actionable advice on how to make your business flexible and future-proof.
Step 1: Company description
The key to a good plan is starting with what you already know and building around that theme.
For starters, you don’t need to write elaborate depictions and envision every single detail. A short description, a.k.a “the elevator pitch”, will do the trick. Imagine you have 30 seconds to explain what your company is all about, ideally reflecting your company’s vision and mission. What would that concise message sound like?
If you’re not sure about what you want your company to be, a good trick is to turn the tables and start with what you don’t want because sometimes we’re more aware of what we dislike. By doing this, and writing it all down, piece by piece you’ll start to paint a picture of what you want.
Step 2: Product/service depiction
Now is the time to get real specific. Describe exactly what you plan to offer to the market in great detail. Whether it’s a product or service, there needs to be a reason why you think people would be willing to pay money for it. Try to pinpoint what makes your offer special and unique, how does it satisfy a specific need of the market and why do you think people will choose it over anything else that is available to them.
A SWOT analysis might be pretty handy at this point as it is a great framework for brainstorming the strengths, the weaknesses, the opportunities and the threats related to your product or service.
Step 3: Market and competitor research
At this point, you should have let go of the idea that your entire business plan is already in your head and it just needs to come out on paper. The true value of your business plan will come from market research of 2 main things: your target audience and your competitors.
Usually, as you acquire information about one, you’ll learn more about the other. This is such an important step. So much so, you probably might choose to make an entirely separate plan in order to perform it more efficiently.
Take Groupe Dynamite for example. For years now, they’ve been using an invented target customer to whom they cater their whole experience, from merchandising to their brand, staff training, and website. Garage’s target is “Alexa,” a 16-year-old girl who loves spending time with her friends and being active, and Dynamite’s was “Rachel,” a late 20’s fashionable professional who enjoys the occasional 5a7 with her friends.
Step 4: Organizational structure, team, and core processes
Here you’ll need to define your needs in terms of staffing resources. Once you’ve made an educated assessment on how many employees you’ll need (or can afford to hire), the next step would be to put everything down into what is called an organizational chart.
This chart serves as a visual aid which shows your organizational structure, basic information about your staff (like their purpose) and the relationship of your company’s core processes.
While bigger companies usually go with a hierarchical structure, often rigid and built around explicit sets of rules, smaller businesses have a tendency of choosing a flat structure, which gives them a competitive edge because of its added flexibility.
You’ll also want to figure out what your hiring process will be. Will you post jobs online or just a “help wanted” poster in your store? What’s your training process? It’s important that you properly train new staff, not only so they are empowered to do a good job, but also to minimize employee turnover.
Step 5: Marketing and sales strategy
Up until this point, you’ve defined what you’re going to sell and to whom you’re going to sell it to. Now, use this information to plan exactly how you intend to sell it.
In your marketing section, create a budget that assigns a dollar amount to each marketing task. There will be costs involved in marketing your business, including software subscriptions, paying for an employee or marketing firm to manage social media, design fees and advertising. Break the budget down by quarter and by marketing channel, then include it in the next section for your overall budget.
Keep in mind that the more work you put into your research phase now, the easier it will be for you to determine the best processes (and eventually software) to assure you work efficiently and that your product or service will reach a relevant and sizable portion of your market.
Step 6: Give your financial plan
This section will be of the utmost importance if you’re applying for a loan or looking to bring on investors. If you’ve been in business for a while, provide data on past sales. If you aren’t yet operating, create sales forecasts for the first three years.
Something every investor or bank will want to see is your business budget. Don’t rush through this section, because you’ll need to cover every inevitability in terms of business expenses in your budget, from inventory to rent and insurance to your own salary.
Even if you haven’t started selling products yet, it’s a good idea to include what your prices will be once you launch. Prices are, especially for retail, the key to your profit margins, and to making investors happy.
How do you calculate your pricing? You’ll need to include four numbers:
- Business cost: What you’ll spend on payroll, inventory, and overhead annually.
- Your salary: The amount of money you plan to pay yourself annually.
- Estimated number of yearly sales: Make an educated guess if you don’t have sales history to help you determine the average markup for your profit margin.
- Average cost per inventory item: Your products might range in price, but taking an average gives you an idea of what sort of profit you can add around that cost.
Also include a break-even analysis that shows how much you will need to make each month to cover your expenses, as well as projected cash flow, projected profit and loss and balance sheet. These are all the essential documents that investors or banks will use to assess how risky your business is, as well as how fast you would be able to pay back a loan.
If you have additional data that is useful in your business plan, you can include it in your plan’s appendix. These extra items might include:
- Additional financial data
- Market research
- Contracts in place
- Credit history
- Licenses and permits
- Packaging design
- Resumes for your leadership team
On the bumpy road to becoming a self-starting entrepreneur, your business plan will be one of your closest allies. On top of providing a guiding direction for your company, it can also be used as a tool to secure funding.
Your market analysis will shine a new light on your product, and your business model will help you pinpoint your most relevant competitors. Each piece of the puzzle will reshape your perspective and affect your outlook, but you need to maintain coherency between these sections so don’t be afraid to adjust accordingly.
Get started with powerful tools
Remember, your business might be small, but your dreams don’t have to be. Chat with a retail expert to see how Lightspeed’s technology can help you accomplish what you’ve put on your roadmap.
News you care about. Tips you can use.
Everything your business needs to grow, delivered straight to your inbox.
Success! You are now signed up to our blog content updates.