Planning sets the tone for making a new business profitable
Monday, December 31, 2007
For anyone considering starting his own business, remember the three Ps of new business startups: Planning. Planning. Planning.
A good business plan is more than just a good idea -- it's essential, said Richard Proffer, business development specialist for the University of Missouri Extension Service, and Bill Vickery of the Small Business Development Center at Southeast Missouri State University.
"The No. 1 reason businesses fail is because they fail to plan," Proffer said.
There may be other reasons, said Vickery, "but it comes back to the planning process."
A person may want to be his own boss, run his own business, but it takes more than a desire to make it work. Vickery and Proffer agree that a potential business owner needs to write out a plan that details who will be the target market.
Key elements of a plan, they said, include the following:
■ Is there a need for the service or product?
■ How will the price of the goods or services fit with the marketplace?
■ What sets the potential business apart from its competition?
■ How much cash will be needed not only to start up, but to carry the business forward those initial months?
The potential business owner needs to consider advertising, both costs and benefits. And the potential business owner should also line up a bank or other financial institution -- or investors -- willing to back the business.
The extension service, Small Business Development Center, and the U.S. Small Business Administration all are ready and able to help a business get off the ground and flying toward success.
When Carole Moore of Perry County started her interior design business, Life Style Design, she was working from her home, and did not have a plan.
"I have one now," she said. "I wanted to expand my business and I wanted to make sure I was expanding in the right direction."
Moore has owned Life Style Designs more than two years, working first from home and now from a shop in Apple Creek. When she decided to expand, she sought help from the SBA and from the development center. Having a plan has made a difference, she said.
"It helped me narrow my scope, helped me to focus on where I wanted to be in the future, where I wanted the business to go," she said.
Having a business plan is helping Moore cope with the cycles her business tends to go through.
"I'm hoping it will show in the bottom line," she said. "I'm not raking it in but I'm doing OK."
Cindy Talley, owner of Final Finish, an upholstery repair and graphics business, found that having a plan and obtaining some guidance through the development center helped her build her business from a mobile one to one that has a location to work from. She recently opened a shop at 3144 County Road 620, although she still goes to many of her customers at their location.
When Talley decided to change her mostly wholesale operation to a retail one, she said it helped to have development center guidance to lead her through the maze of paperwork.
"I didn't know at that time that I needed a license for a business or that I needed to be incorporated," she said. "I did not know any of that. There were so many little things I did not know I needed to do. Marketing was a big thing. It was a big thing when I decided to put an ad in the Yellow Pages and do different marketing strategies."
Talley includes among her customers Hutson Furniture, St. Louis University Hospital and Southeast Missouri Hospital. She hopes to be able to expand enough to hire another employee. She advises anyone who wants to go into business to seek assistance and work up a plan.
"There are so many things you don't know you need to do," she said.
The best of intentions can sometimes fall short. Frequently the reasons have to do with money, or a lack of it.
"A lot of businesses have cash-flow problems," Vickery said. "They run out of cash as they're moving along, especially when the business is growing. Sometimes they'll open a business because it's something they want to do, but there's not necessarily not a need for the product or service. They find out there's no market or the market isn't big enough to sustain them. It all comes back to planning."
Owning one's own business can be a gamble with or without a plan.
"Seventy-five percent of all new businesses fail their first year," Proffer said. "Over the next three years over 60 percent of the remaining 25 percent will fail."
With statistics like that, why risk it?
"The rewards are great," Proffer said. "There's a lot of satisfaction in owning your own business. You are earning your paycheck as opposed to working for another person. A lot of people find that very rewarding and freeing for them. They get to do what they've always wanted to do."
A business may not succeed, but that won't always deter the business owner. Proffer said he spoke recently with an individual making a second attempt after one failure.
"He said 'I can't go back'" to working for someone else, Proffer said. "It's not uncommon. A lot of people, once they get the entrepreneurial bug, that's what they want to do. There are 'serial entrepreneurs' out there who start a business after they've been in it about a year will sell it and start up a new one."
Most likely, they'll have a plan.