So, you have an idea for a business, eh? Has the thrill turned into fear yet? Already? There’s an old proverb that says, “Don't worry, the first step is always the hardest—it'll get easier after that.”
Everyone understands that the key to tackling something as complex as starting a business is to create a solid plan. But where should a business plan begin?
The first step in developing a business plan is research.
It doesn’t have to be daunting. Here are some tips of where to start.
When developing a business plan, the internet will become your new best friend. While much of the truly useful information, such as industry forecasts, external drivers, product segmentation, and so on, is located behind paywalls, there is still a wealth of free information available. After all, you're not the first person to start a business, and people are often willing to share their experiences. Even if your concept is groundbreaking, you don't have to completely reinvent the wheel. (Unless, of course, your business is reinventing the wheel!)
Here are a few things to research when starting a business:
You know your town as well as anyone, so if you’re opening a retail space, I bet you already have a location in mind. If not, you can use a mapping website to see where competitors and customers might be located to find the best spot for your new business.
This is the most rapidly changing business requirement due to COVID-19. Many jobs will be suitable for allowing work-from-home, which can save you a lot of money on office rent. However, if you do require a space, commercial leases are more affordable than ever. To begin, what is the approximate square footage that you will require? Consider how quickly you'll need to expand and how many employees you'll need to accommodate. A good rule of thumb for an office is 150 square feet per worker.
Once you decide on a general size and location, Loopnet.com is a great resource to look up going lease rates per square foot. Typically, I suggest aiming on the high side here, and don’t forget to factor in utilities. Around $2 per square foot is a good starting point for utilities.
Salary.com is an excellent resource for comparing salaries by position type and location.
If you are opening any kind of retail space, visit your competitors. What are they doing well? What can they do better? What is the style of their interior design? If your competitors are more of an online company, you can still learn a lot about them through internet searches.
You should get a rough idea of what you’re going to charge for your products and/or services. This type of unit assumptions will help you understand your gross margin and what you need to offset all of the above expenses and attain profitability. Unsure what the averages costs are in your industry? Try an internet search or call a supplier and ask!
You'd be surprised how much data is available, especially if you run a typical business like a restaurant, retailer, or office. You can literally Google things like "how much does it cost to open a café?" and come up with some interesting results. Make a list of everything you'll need, including computers, furniture, marketing, and software. At the very least, it might make you think about accounting for something you hadn't considered before.
You can finish this later, but it's a good idea to get a sense of your legal structure (LLC vs S-Corp vs C-Corp) and assess your legal needs now. Each has its own set of tax and ownership ramifications.
As you begin to compile these figures, you'll realize you've taken the first concrete step toward developing a business plan.