According to studies, over 80% of newly started small businesses fail within the first three years in India. 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.
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.
For instance, let’s consider an example of a new restaurant called “Spice Haven.” The company description for Spice Haven could be something like this: “Spice Haven is a vibrant and contemporary Indian restaurant aiming to bring authentic flavors from various regions of India to our customers. Our mission is to provide a culinary journey through India’s rich gastronomic heritage, offering a diverse menu inspired by traditional recipes with a modern twist.”
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.
Continuing with our example of Spice Haven, the product/service description could delve into the restaurant’s offerings, highlighting its unique selling points such as using locally sourced, fresh ingredients, offering customizable spice levels for each dish, and providing a curated selection of regional specialties not commonly found in other Indian restaurants in the area.
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.
One way to conduct market research is by analyzing industry reports, conducting surveys, and studying demographic data to identify your target audience’s preferences, behavior, and purchasing power. Additionally, studying your competitors’ strengths and weaknesses, pricing strategies, and customer reviews can provide valuable insights to help you differentiate your offerings and identify opportunities for growth.
For example, let’s say Spice Haven conducts market research and discovers a growing trend of health-conscious consumers seeking plant-based options. By identifying this niche market segment and the lack of vegetarian-friendly Indian restaurants in the area, Spice Haven could capitalize on this opportunity by offering a diverse selection of flavorful vegetarian and vegan dishes, setting itself apart from competitors and attracting health-conscious diners.
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.
For instance, Spice Haven might outline its organizational structure, detailing key positions such as head chef, kitchen staff, servers, and management roles. Additionally, it could establish a hiring process that involves advertising job openings on social media platforms, conducting interviews, and providing comprehensive training to new hires to ensure consistency in service and uphold the restaurant’s standards.
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 specific 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 the ideal software solution) to assure you work efficiently and that your product or service will reach a relevant and sizable portion of your market.
For example, Spice Haven could develop a marketing strategy that includes both online and offline tactics to effectively reach its target audience. Online strategies could involve creating a user-friendly website with online ordering capabilities, engaging with customers on social media platforms like Instagram and Facebook, and investing in targeted online advertising campaigns. Additionally, implementing a foolproof loyalty and promotion management solution can help nurture all customers, turning them into brand ambassadors. Offline strategies could include participating in local food festivals and events, offering cooking workshops or tastings, and collaborating with local businesses for cross-promotional opportunities.
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.
Extras
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
Plan ahead
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.
