Starting a business? Have an idea you believe is market ready? Congratulations! You are ready to take your first step in business ownership, namely determining the feasibility of your product and/or service and then preparing your business plan.
An effective launch of a business requires thought and planning. Your business plan is your blueprint, your marching orders, and your roadmap to success. If you are asking “Do I need to go through all that or can I just launch my business”, you may want to give business ownership some thought.
According to Aregnaz Mooradian, Deputy District Director, NC SBA District Office: “Business plans are living documents and are vital to businesses of any size and industry. They are used as a roadmap you can reference back to, for structuring, managing and expanding your business. Business plans are also important because they can help you get funding. Investors need to feel confident you will meet your commitments, and want to be able to see a thoughtful and complete plan to show you have taken into consideration the many different facets of running your business.”
While some ideas are quite innovative or some markets are so in need that a business can just launch, most need planning and all will need a track record of what was planned, what was achieved, and where to go from here, especially if that business is looking for funding at any time.
Business plans are written to the understanding of a lender or other funding agent. Put yourself in the shoes of the lender, investor, or even a wealthy family member. Would you lend money, potentially a lot of money to someone’s idea or would you want to see something concrete like results or a plan? Having been in banking and finance for a number of years I can unequivocally say that a business plan is necessary for funding. While lenders may have a business relationship with you, they need to qualify your idea as being sound enough for investment. Lenders and investors have regulations and policies to adhere to and the business plan and the results the business promises help these entities decide if your business concept now or in the future qualifies for funding.
Developing a business plan begins with having an idea that is feasible in the market you are planning to enter. A feasibility study can be cumbersome but does not have to be. At the DDCC Small Business Center, we work with individuals to develop their idea into a feasible concept through research, testing, surveying, and other methods.
Once you prove you have a sufficient market for the product or service to be offered, you can begin the planning process.
But, what happens if the idea is not feasible? Does that mean it’s all over for our upcoming business owner? No. Often, through the feasibility study process, we see that there are better options. For example, I worked with an individual a few years ago who was set on offering a variety of products to the residential consumer market in a particular area. After doing our market analysis it was obvious the price the business owner would have to charge would not be borne by this market. It would place its products out of the price range for most of the buyers. But, moving to B2B sales was an option and, with higher volume contracts, the business owner could cover more of the cost and make a nice profit in the end. Instead of offering products to the end user, the business owner offered inputs to the production process. So, sometimes plans change based on the feasibility study.
Tip 1: Do your homework. A feasibility study is necessary and does not have to be stressful. In the SBC we have a cheat sheet with some questions to get you started. We also have business plan development workshops that include the feasibility study starting on Friday, October 28 at 3 p.m. If you miss this workshop, please contact us and we will work with you individually or in another series of workshops. Best of luck with your business concept!