There’s never been a better time — or a more confusing one — to start or run your own business. The idea of owning and operating your own business is appealing, but the process can be overwhelming.
There’s no one way to learn how to run a business, but in this article, we’ll take a look at a five-step process for creating a business plan. It can test the core identity of your business in order to help you make decisions and grow. Before you start and once you’re off the ground, follow these five steps to make decisions about your business.
1. Develop Your Business’s Core Idea
It doesn’t matter what your business does or sells, or even what industry you operate in — if you can’t describe what your business does, specifically what service you provide, you can’t hope to survive. Every business needs a single, effective idea that every decision, purchase, and strategy serves. Before you worry about how to run a business, you have to focus your idea.
One of the keys to a successful business plan is knowing what your business isn’t — this is just as important as knowing what it is. It doesn’t matter what type of business you want to run. Maybe you want to sell the best Greek food in your city. Maybe you want to provide consultations for healthcare providers to help lower their costs. Maybe you want to be the biggest gutter cleaning service for homeowners in your area. The only thing that matters is that you have a clearly defined idea of the service you want to provide.
That’s especially true if you’re starting a small business. As a small business owner you’ll be pressed for time, money, and sanity. Knowing exactly what your business isn’t is just as important as knowing what it is so that you don’t waste time or money. Can you accurately describe the purpose your business serves in a single sentence? If you can’t, it’s nearly impossible to build accurate, attainable business goals.
The clearer your idea is, the easier it will be to determine everything that comes next: Your business structure, marketing strategy, and cash flow needs. You’ll encounter an endless amount of decisions as you build out a new business. If you can stop and ask yourself, “Does this help us achieve the one thing our business wants to do?,” it’s much easier to make a business decision that pays off.
2. Identify Your Business’s Potential Customers
Congrats, you’ve got a simple, single idea about what your business is and what your business provides. But is it any good? The way to determine that is through market research.
You can’t survive the free market without a customer base, and business success early on will be predicated on your ability to fill a need in that market. In other words, do people want that idea you have? Is it appealing? How unique is it? Can customers sfind what you’re offering somewhere else for a better price?
If you’re determined to serve the best Greek food at any restaurant in your town, you need to figure out if your passion matches your potential customer’s palate. Everyone eats dinner, but what are the popular cuisines in your area? What price level succeeds there? Sure, you might have a passion for Greek food, but if there aren’t enough people willing to pay to share in that passion, your business can’t function. Or maybe it’s the opposite, and there are already multiple Greek restaurants in your town. Then what?
Every business needs to determine its target market and potential competitors. If you want to start a business that cleans gutters, it helps if the area in which you’re operating has a lot of residential buildings — and leaves to clean up.
After you determine a target market, you’ll need to evaluate potential competition. If your consulting firm is one of hundreds nationally that offer the same services to healthcare companies, you need to determine if there’s enough of the market to go around. Can you manage to offer something unique that differentiates you from the competition?
It’s important to notice warning signs for potential customers. If there’s too little demand for your idea or too much of your idea on the market, it might be time to go back to step one and reevaluate.
3. Create a Focused Marketing Plan
Once you’ve crafted an idea and feel confident that you’ve found a target market, you’ve got to let that market know you exist. The great news is that now more than ever there are a multitude of platforms to communicate with potential customers. The bad news is that in an increasingly diffuse landscape for mass media and advertising, it’s hard to know exactly where to put your energy so you can reach the right people. Finding a successful marketing strategy is critical to figuring out how to run a business.
Should you spend advertising dollars with your local paper or with Google ads? Should you hire an employee to manage social media accounts in hopes of connecting with potential customers, or should you just post flyers with your phone number around town? There’s no right answer for every situation, but there isn’t supposed to be.
Much like how your idea informs who your target market is, your target market will inform your marketing plan. The best way to determine how to reach your potential customers is to examine how they consume advertising and media.
New media platforms are dynamic, personal, and relatively cheap ways to communicate to the market, but the time you invest is only worth it if the exposure created turns into business. Chances are you can run a successful business cleaning gutters without having to start a podcast, but a podcast dedicated to the history of Greek cuisine might be a fun, interactive way to draw customers to your restaurant.
If you’re a local business, communicate locally with radio stations and newspaper advertising. If you’re a consulting firm trying to survive in health care, optimizing SEO and advertising across various national industry sites and publications makes sense.
Marketing plans are vital, and creativity is often rewarded with new customers, but your plan of attack doesn’t have to be overwhelming or too intricate. Look at your ideal customer and follow their behavior.
4. Make Sure You’re Funded the Right Way
No business survives without money, and if you’re a small business start-up your primary focus will be staying afloat financially. In the world of business loans, there’s also such a thing as having too much money — you’ll have to pay back your creditors over a period of time, and calculating what you can afford on a monthly basis could be the difference between staying in business and not.
Check with your city government or community to see if there’s a small business development center near you. These centers are set up by cities and states to help you learn how to run a business as a first timer. You’ll go through the realities of borrowing money, calculating business expenses, and creating a payroll. Most development centers offer free consultation from local business owners, bankers, and accountants on what to avoid when spending on your start-up.
Unless you’re sitting on all of the start-up money you need, you’ll need outside funding. You can’t run a successful small business on credit cards. You’ll have to convey that original idea — as well as your target consumer and your marketing plan — to an interested lender in order to secure a small business loan. The sharper your idea, clearer your target consumer, and more refined your marketing plan is, the better chance you’ll have of securing a loan.
5. Set a Realistic Goal for Your Business
Once you establish the terms of a loan, you can start work: Rent a space for retail, buy equipment, make personnel hires — it’s go time! But make sure you bookend your business’s one core idea with a set of identifiable goals. A whopping 75% of venture-backed start-up businesses fail, according to one Harvard study.
In order to even make it to your business’s first anniversary, you’ll need to set a realistic goal. That might be predicated by the amount of revenue you need to pay employees or your funder (or both). It might be the terms of service you have with customer contracts. No matter the set-up, it’s important to identify a realistic goal you want to hit in a short amount of time. Hitting that goal (or failing to) will allow you to step back and evaluate your business objectively, hopefully allowing for improvements.
Creating a Plan You Trust Is How to Run A Business
You’ll undoubtedly run into ups and downs as your small business develops, but sticking to your core idea, continuing to study your consumer base, and messaging your customers effectively are the keys to building a successful company. When you own and run a business, there’s no such thing as “full-time” or “personal life.” Your heart, soul, and financial security are invested in the success of your enterprise.
Making your plan is great, but so is change. As you truly learn how to run a business, you’ll find what works for you and what doesn’t. You shouldn’t stray from your core concept, but don’t be afraid to change something that isn’t working. Learning and adapting are how good businesses become great — and how your business can keep its doors open.