You’ve got a great idea for a small business and you want to get started. Or maybe you know you want to have your own business, but you haven’t yet decided on exactly what it should be. A good place to start, in both cases, is to ask yourself some questions to clarify and solidify your ideas, and prepare yourself to develop a business plan.

Why do a business plan?

First, making the effort to write out a plan will help you think about the different aspects of your business, such as the product or service you will be providing, your intended market, how you intend to reach that market, the resources you will need, how you will finance your business, and a timetable for implementing your plan and getting your business operations underway. This exercise will pay off in the long run, because it may make you think about aspects you had not yet considered. This can help you avoid potential pitfalls, and will show you the areas in which you need to concentrate your efforts. This could lead to innovative approaches or solutions. Of course, many of your challenges will arise when you are actually involved in the day-to-day operation of your business, but by thinking and planning ahead of time, you will be in a much better position to take on these challenges.

Your business plan will serve as a solid foundation for getting started. Based on your plan, you can develop your overall business strategy, which will set the direction you want to take in your business. Your plan and your strategy will help keep your business on track, and headed in the right direction. By giving you a solid base, a business plan can also provide you with the confidence to move ahead and take advantage of opportunities that arise, knowing that they are aligned with your original intent. In this sense, the business plan is a tool that provides a good starting point, but can also be modified and adapted as your business grows and evolves.

A business plan lends seriousness and credibility to your business. Based on your plan and strategy, you can start to build budgets for start-up costs and operations, prepare cash flow forecasts, and make other types of financial projections, such as pro forma income statements and balance sheets. This will give potential lenders and investors the information they need, will give them more confidence in your business, and will improve your likelihood of getting the financing your business needs for start-up costs and working capital.

A business plan will also help you manage the business itself. Having your plan as your foundation, and your business strategy as your direction, you will be able to foresee and overcome difficulties, identify and take advantage of opportunities, adapt to changes in the marketplace, control costs and maximize earnings.

Ask yourself some questions

The initial process of writing a business plan may consist of sitting down and asking yourself all the questions that come to mind, and then answering them. If you are not yet sure what type of business you want to start, this exercise may help you in your decision. And, even if you are already sure about what business you want to start, by asking yourself these questions you may either further convince yourself that your idea is a good one, or you may find ways to adapt your idea to make it better. Finally, even if you find that your idea is not as feasible as you thought, by working through your uncertainties, concerns and doubts, you may come up with a more practicable idea. In any case, going through the exercise will help you turn your idea into a workable plan, and you will feel more confident about your business idea.

What do I want to do?

Think about what you enjoy doing, and what you are passionate about. What do you hope to gain from your own small business in terms of earnings and personal satisfaction? Keep your family in mind; you will need their support.

What can I do?

What are you good at? Everyone has their own unique set of talents and abilities. Think about how you can apply these, along with your knowledge, skills and experience, in a small business environment. You could also think about whether you might need additional education, training, or preparation in certain aspects of your business, such as marketing, administration or finances.

What services or products could I offer?

You can think about this in terms of the first two questions. Your product or service should be a reflection of what you want to do and what you are good at. Are you planning on providing a new product or service, or an adaptation or better version of an existing product or service? Do you have the resources and the know-how to make the product? Based on your knowledge and experience, what type of service are you qualified to offer? Do you need any type of certification or license to offer the service?

Does my business idea fill a need?

What do you have to offer potential customers or clients? Try to define the need you have observed and how you could fill it. What type of need is it – a basic need or a perceived consumer preference? Maybe the product or service you plan to offer doesn’t necessarily fill a need, but it could be something customers or clients want, and are willing to pay for.

What is my market?

Your market could be defined based on the product or service you intend to provide. Or you may look at it the other way around and develop a product or service for a specific market. Are you thinking about a niche market? If your product is something new and unique, you can identify yourself as the first to offer this product. Or you might be offering an improved or modified version of a product or service, that more closely meets customers’ needs and expectations. Sometimes you can group products or services together, to provide a more complete "package" that gives customers or clients more personalized service.

Who are my competitors?

In what arena will you be competing – local, regional, national, or global? How big are your competitors – small, medium, or large-sized companies? How long have they been in business? What is their market share? How difficult is it to break into the market? You should keep in mind that in a globalized world, you may not know who your competitors are, and they may move in and out of the market rapidly.

What is my competitive advantage?

The important thing to think about here is what makes your product or service stand out from the rest. Your may be offering something extra in terms of service or personalized attention. You may have an advantage in terms of cost efficiency or more direct access to a market. These considerations will come to play an important role in your marketing strategy.

Getting down to specifics

Once you have thought about these initial questions, you will have already started thinking more in terms of strategy and implementation. Your idea should be taking shape in terms of an actual business endeavor. Now you can start asking yourself more specific questions about how to get your business up and running.

Who will be part of my small business?

Do you plan on working alone? Will it be a family-owned business? Are you planning on having partners? Do you need to hire employees, and if so, how many and for what types of functions? Do you know people who would like to work with you?

From where will I work?

Maybe you are planning to have a home-based business. If so, do you have enough available space at home? Do you need a shop, storage or warehousing facilities? Do you need an office and a place to meet with customers and clients? Is there outside space available for lease where you want to establish your small business?

What legal structure will I use?

If you are planning to work as an independent contractor or as a sole proprietor you will not need to worry about setting up a new legal entity. But you may be considering a partnership, an S corporation, or a regular corporation. Are you familiar with the requirements and relative advantages and disadvantages of each type of legal structure?

What resources do I have?

How much money do you have available to invest in the business, without sacrificing your own, or your family’s financial situation? Do you have property or assets to invest in the business? Do you have family members who are interested in either lending you money or investing in the business itself? If you are planning on starting a business as a partnership, what resources do your partners have to invest in the business?

What resources will I need?

This will depend on whether your business involves a product, service, or both. Think about the process of developing and getting the products or services ready for market to determine what you will need.

What financing will I need?

This will be the difference between what you need and what you have. Keep in mind not only the initial investment in start-up costs, property and equipment, but also your working capital needs. You will need to keep your business operating until you start generating profits.

Where will the financing come from?

Can you obtain financing from family and friends? How is your credit rating? Can you obtain bank loans? Is there equity financing available for your business, that you would be willing to accept?

Are there any statutory or regulatory requirements I have to meet in order to operate this business?

You may already know what these are, based on your background and experience in your line of business. You should identify these requirements and plan ahead so you won’t lose time once you are ready to start up your business.

What will I name my business?

Here your creativity enters in. The name you use for your business is part of the face you will be showing your customers, clients, vendors and others, and will form an important part of your marketing strategy and your public relations.

Getting on with the plan

As you go through the process of thinking about the questions above, you’ve already started putting together your business plan. You may want to make notes as you go; then you can put your notes together and draft a written business plan. There is no standard format for a business plan. It should reflect what is unique about your business. But your business plan should also be as objective as possible, with as much concrete information as possible, since you will most likely want to present it to potential lenders, investors, and other interested third parties.

The following are some general guidelines on the content that should be included:

Description of the business

This section could be thought of as a statement of purpose or mission statement. It should clearly state why you are setting up this business and what you hope to accomplish, so that others can understand and appreciate your plans. You should go into sufficient detail in order to clearly identify your product or service, the development phase to bring it to market, and the operating phase. Provide as much background information as you have available about the business – its name and address, telephone numbers, e-mails, website, owner(s) and legal structure.

Marketing

Here you should identify the specific market or type of consumer group you are targeting. If it is a niche market you should describe it as much as possible. Any market studies or other preliminary information you have should be included here. This section should also include your marketing strategy - how you plan to reach your potential customers or clients.

Finances

This section will be especially important to potential lenders and investors. Here you should indicate the resources you plan to invest in the business, and any financing you have already obtained. You should have a budget for start-up costs and capital expenditures for property, vehicles, machinery, equipment, furniture and installations; and an operating budget. These budgets should be based on the best information you have available, and if you have any quotes or price lists, you may want to include them as an attachment. You should also prepare a current and pro forma balance sheet, income statement, and cash flow statement. These may have to be estimates or projections until your business is up and running. If you have done any analysis, such as return on investment or net present value calculations, these should also be included.

Management

The management section focuses on the people involved in your business – who will do what, the assignment of responsibility and accountability, operating procedures, financial controls, and in general, how the day-to-day activities of your business will be carried out. You may want to attach personal resumes for the principal persons involved.

Your first draft of a business plan is a big step forward. And remember that it is the starting point. You can continue to add to your business plan and modify it as new information comes in and your business begins to take shape. Your business plan is a document that you will want to keep current over time. It will be a valuable tool in helping you manage your business.