Considerations for Starting a Small Business, Part Two — Chicago Business Attorney Blog — August 24, 2021
Recently, we ran a post What to consider when Starting a Small Business, Part One about some of the early steps in starting a small business—deciding you’re ready, figuring out what type of business you want to start, surveying your competitors, and figuring out the optimal business model.
At that point, it’s time to get down to the proverbial brass tacks and put together a business plan, which really doesn’t need to be more than one page long unless you’re going to apply for a loan from a bank (in which case you should find out what the lending institution requires).
Otherwise, you should still be sure to answer questions like: What problem(s) does my business solve? What does my business do (a quick elevator pitch)? Who are my target audience(s)? What are my business’ strengths, weaknesses, opportunities and threats (SWOT analysis)? How do I plan to market and otherwise promote the business? Who is on the management team? How will we cover costs and make money, both at first and longer term? And what are the most-educated-guess, quarter-by-quarter and three- to five-year financial projections?
Going forward, you should review this plan monthly. It needn’t take more than 20 minutes, but it’s important to recap the business’ sales, customers and prospective customers for the previous 30 days, think further about issues like pricing and marketing, and project ahead to the next 30 days and what you believe you should be able to expect.
Although it’s probably too much detail for a one-page business plan, on the financial end you should be drilling down to calculate anticipated monthly expenses, such as: machinery and equipment, furniture and fixtures, inventory, supplies, rent or mortgage payments, insurance, employee payroll, marketing costs, and fees for legal, accounting and other outside services.
On the opposite side of the ledger book, you should think about what potential sources of initial capital your business could attract, how likely any given source is to be successfully tapped, and how their capital can be infused into the business—and protected from potential claims. If there is more than one principal investing in the business, you need to sort out how much you are each investing, how you’re dividing overall control of the business, how it will be managed day-to-day, and how you are sharing profits—and liability for losses.
With your ideas fully fleshed out, you should get feedback on your goals, plan and overall idea. Ask trusted, knowledgeable people outside the enterprise for their two cents worth of free advice, and get second and third opinions on how to make your idea work best—or whether it’s even worth pursuing in the first place. Sometimes, it helps to ask specific questions about one aspect of the goals and plan rather than a broader, “What do you think?”
Once you gather that feedback … you’re still at least a handful of steps from being ready for launch. Keep tracking our weekly posts this month for more.