One: Getting Started
is for your business what the four food groups are for your body: it
is fuel; it is nourishment; it is essential for health and growth. Before
starting a business, the entrepreneur needs to prepare a business plan.
Before preparing a business plan, the entrepreneur needs to do a little
homework, otherwise known as research. Research provides the “what,”
“where,” and “how much” that every business owner needs to know to be
successful. Keep up with your homework, and the whole process of starting
and running a business will go much more smoothly. Your research will
also create the foundation for all financial projections that you will
make related to your business. Do a thorough job conducting your research
and you will create a sound foundation for your future financial projections
and for the future health of your business.
Where? How Much?
first thing an entrepreneur needs to determine before starting a business
What do I Want to Sell?
you have already decided what you are going to do, click here to skip this section.
at your interests, your past experience, your skills. For example, if
you spend your weekends taking car engines apart and putting them back
together, perhaps you could operate a successful auto repair shop. If
your whole family raves about your cooking, you may want to consider
opening a catering business. If you have a knack for creating beautiful
flower arrangements, consider becoming a florist.
you need help coming up with ideas for your business, you may want to
visit your local library. Ask the librarian for assistance in finding
a helpful book or magazine. Here are some ideas for books:
Great Ideas for Your Small Business: Revised &
Updated Edition, by Jane Applegate
Turn Your Talents into Profits: 100+
Terrific Ideas for
Starting Your Own Home-Based Microbusiness,
Darcie Sanders and Martha Bullen
What Color is Your Parachute,
by Richard Nelson Bolles
The 100 Best Businesses for the 21st
Gregg Ramsay and Lisa Rogak
are some web sites that might help you come up with
ideas for your small business:
http://www.entrepreneur.com – This is the web site for Entrepreneur magazine.
http://www.sba.gov/library/pubs.html –This site will take you to the U.S. Small Business Administration’s
on-line reading room. Peruse this site for articles related to developing
an idea for a business to start.
This is the web site for Small Business Opportunities magazine.
http://pandecta.com/index.html –This web site contains ideas for starting on-line businesses.
you know what you want to sell, the next step is finding out as much
as you can about your chosen business. Skipping this step is like building
a brick house without mortar. The research you complete here will help
you determine sales and income projections, the size of your market,
and facts about your competition. In the United States, all types of
businesses are classified with a number. This classification system
is called the North American Industry Classification System, or NAICS.
Formerly it was known as the Standard Industrial Classification (SIC)
system. The NAICS classifies 1,170 industries, of which 565 are service-based.
It is very specific in its classification. For example, a search using
the word “food” produced forty-three matches, ranging from “Food Service
Contractors” (number 722310) to “Food Machinery Repair and Maintenance
Services” (number 811310). Each match is broken down even further. Select
“Food Service Contractors” and the classification is broken down into
seven more specific categories ranging from “Airline Food Service Contractors”
to “Industrial Caterers.” For more information about NAICS codes, visit
the Small Business Administration site’s relevant pages: http://www.sba.gov/size/indexsize.html#Introduction.
find out the classification number for your business, go to the U.S.
Census Bureau’s web site (http://www.census.gov/epcd/naics/framesrc.htm).
You will be prompted to enter a word related to your business. For example,
if you want to manufacture garden furniture, you could enter “garden.”
From the list of businesses with “garden” in the description, there
are three related to “garden furniture.” Once you know the NAICS number
assigned to your business, you will be able to find out a lot of information
about your specific industry.
find out more about your industry once you know your NAICS number, go
to the part of the Census site that contains data from the economic
On this page, you can find information such as the number of retail
trade establishments in your area. At the top right-hand side of the
page, there will be a drop-down box from which you can select a location
in which you are interested. Then once the data appears, click on the
arrow located on the far left in the row next to the category in which
you are interested. Clicking this arrow will make your search more specific.
Continue clicking the arrow until the industry you are interested in
Will My Customers Be? (return
you know what product or service you want to sell, you will want to
find out who will buy it. Years of experience may have given you an
excellent idea of who your customers will be. For example, if you
are opening a shop that sells designer wallpaper, you may know that
your customers have higher incomes and own their own homes. If you
don’t really know who might be interested in what you are selling,
do some homework. In both cases, once you have a general idea about
your customers, you will want to find out their specific characteristics
and where they can be found.
what you know.
The first step of all research
is to write down what you already know. So
write down what you now know about your customer.
The next step is to write down what you don’t
know. You know that the customers for your
designer wallpaper shop have higher incomes
and own their own homes. You don’t know their
age, their race, the neighborhoods they live
in, their religion, their education level,
etc. What might motivate them to buy your
product? So make a list, and then find the
answers to these questions.
Determine what information is already available. Much
of the information you seek is probably on-line, on this CD, in a book,
in a magazine or in some other resource available through your local
library. This information is called “secondary data.” For demographic
information in Virginia provided by the Weldon Cooper Center at the
University of Virginia, please
click here. For quick facts about Virginia provided by the
U.S. Census, click
here. This site also allows you to select a particular city or county
within Virginia and obtain quick facts about that specific area as well.For
web sites that may lead you to the data you seek, check out “Helpful
Links” at the bottom of this page.
the information you need is not currently available, you can gather
it yourself. If you're opening a designer wallpaper shop, stop by
the designer wallpaper shop in the neighboring town and see what its
customers look like. Develop a brief survey and take it to an area
of town where people who would purchase your product shop, live or
congregate. Ask the questions on the survey to some of these people
to gauge their interest in your shop. Offer coupons for a discount
in your store (once it opens) if they answer the questions. You may
also direct your survey questions to people on a random basis.
For an example of a
survey designed to gain information about your customers, click
here. Surveys can be used to find out more than information about
your customers. You can use them to help you price and market your
product or service and to find out more about the competition, as
well. For an example of a brief market survey, click
Another way to increase your
understanding of your potential customers
is to form a “focus group.” Gather together
a small number of people whom you think may
be interested in your business. Ask several
open-ended questions and encourage a discussion.
The type of information you
gather from this kind of research is known
as “primary data.” For more ideas on gathering
primary data about your customers, visit: http://ollie.dcccd.edu/mrkt2370/Chapters/ch3/3prim.html
Are My Competitors? (return
deciding where to locate your business, you
will want to find out about your competitors.
Who are they? How many are they? Where are
they located? Although there are exceptions,
you probably will not want to locate your
small business close to someone who would
be in direct competition with you.
Finding out as much as possible
about your competitors will help you in many
ways. You may be able to avoid mistakes they
made. You will gain information that will
help you with decisions about where to locate
your business, what to charge for your products
or services, and ways to advertise your business.
How do I find out about my competitors?
If you have completed research
about your industry and about your customers,
you have already done some of the necessary
homework for finding out about your competitors.
Industry research will let you know, for instance,
how many other businesses like yours are operating
within your city or county. Customer research
will guide you to where your potential customers
are shopping and why. As part of your competitor
research, you may want to ask potential customers
survey questions geared to discover information
about the competition. If they currently use
products or services like yours, where are
they buying them? What are they paying for
them? What do they like and dislike about
your industry and customer research guides you to who your competitors
are, visit their web sites (if they have one). You can learn a lot
from a visit to your competitors’ web sites. For instance, they may
have information about prices, services, locations and contact information.
The look and features of the web site itself will give you an idea
of your competitor’s professionalism and possibly his or her resources
After visiting web sites,
you may want to call your competitors directly
to find out more about them. Ask the kinds
of questions a customer would: questions about
the prices they charge, the types of products
and services they sell, turnaround time for
service, etc. If your competitor has a shop,
visit it for ideas about products and advertising.
Another way to find out about
your competitors is to talk to other business
owners who have had dealings with them. What
kind-of service did they provide? What were
the pros and cons of working with them?
Here are links to web sites
that provide information about researching
Should I Locate My Business? (return
Congratulations. If you have conducted research on your industry,
your potential customers and your competitors, you have completed
much of the homework you should do before deciding where to locate
your business. For instance, if you find out from your research that
your customers are only willing to travel fifteen miles out of their
way to visit your shop, you will want to open it close to a neighborhood
where many prospective customers live. If you are opening a donut
shop, you will probably want to make sure you do not open on the same
street as a nationally known donut shop.
Additional things to consider
when deciding on a location include taxes,
laws and permits, roads and facilities, incentives
that might be offered to new businesses, access
to interstates, availability of warehousing,
and complimentary businesses located nearby.
For instance, a shop selling wedding dresses
might do well located close to a bakery selling
wedding cakes. Another consideration is the
cost of operating in a certain area related
to the benefit. For example, perhaps your
business does not need to be located in a
high-rent mall. Keep in mind alternative locations
One such alternative is a “business
incubator.” The business incubator provides office space and office
amenities, such as a receptionist, for small businesses. To find a business
incubator near you, go to http://www.vdba.virginia.gov/smdev/sbincubator.asp#VAMap.
And, of course, many choose
to run their small businesses from home. If
you decide to operate from home, make sure
you will be able to meet any county and state
regulations related to running your particular
Here are links to web sites
that provide information about choosing a
location for your business:
Do I Finance My Business? (return
You have a great idea for
your business and you have found the best
place to locate it. You know who will buy
your product or service and you know who your
competitors are. But starting and running
your business is going to take cash, possibly
a lot of cash.
Working capital, otherwise known as cash, is the oxygen that keeps
your business breathing. Without enough working capital, your business’s
vital functions will fail. It won’t be able to meet its daily
requirements for living, such as purchasing supplies, paying rent,
and paying salaries. In a word, before creating your business, make
sure you will have enough money to keep it alive. The NX Level
Guide for Business Start-ups (February 2002) states that inadequate
capital is the most common reason given for the high failure rate
of small businesses.
Where are you going to
find the funds to start and run your business
There are several steps to
take to ensure that your business will have
enough capital to start and continue running.
1) Complete your Business
The Business Plan includes
a section about Financial Matters. Within
this section, you will tabulate financial
data and projections related to your business.
The Financial Plan portion
of the Business Plan includes: a) Start-up
Expenses; b) An Estimate of Future Sales;
c) Estimated Cost of Units Sold; d) Fixed
and Variable Expenses; e) Cash Flow Projections
(very important); and f) A Break-Even Analysis.
2) Determine how much capital
you will need to start your business and to
keep it running. Based on the estimated projections
contained within your Business Plan, you will
be able to determine how much money you will
need, both to start your business, and to
keep it humming.
3) Determine how much cash
you have available through personal sources
that you are willing and able to use to fuel
your business. (Personal sources include:
savings accounts, insurance policies, stock
and other investments, second mortgages, and
donations from friends and relatives.)
4) Figure out how much money
you will need for the business after you have
contributed all of the personal funds that
you are able and willing to contribute.
5) Find a source for the
remaining needed funds. Other sources include:
a. Debt. Debt is
a loan made to you or your business. Sources
of debt lending include banks, credit unions,
federal lending programs and state financing
b. Equity. Equity
is ownership rights and privileges in your
business that you give away in return for
capital. Businesses seeking this type of
financing must become a Partnership, Corporation
or Limited Liability Company.
c. Alternative Funding.
Alternative means of funding include: suppliers
who provide concessions, such as extended
payment periods and discounts; and grants.
6) Prepare a written Financing Proposal.
The Financing Proposal is used to secure loans and equity financing.
Before preparing the Financing Proposal, complete the Financial Plan
portion of the Business Plan. This section of the Business Plan will
contain much of the information and data you will need for the Financing
Proposal. The Financing Proposal contains the following:
a) Cover Letter;
b) Summary (contains the purpose of the financing, amount and terms
requested, how the funds will be repaid, and collateral);
c) Details on how the capital invested or loaned will be used;
d) Details on Collateral (if seeking a secured debt);
e) Information on the financial return for investors (if seeking equity
f) Your prepared Business Plan (Financial data and projections are
If you follow the steps
above, you will equip your business with the
cash it needs to breathe, both at its creation,
and into what will hopefully be a long life.
For additional information
http://www.sba.gov/financing/basics/basics.html (Small Business Administration)
http://www.mymamasaid.com/save/article/106/ (Tips on Financing)
http://www.vdba.virginia.gov/financing/ (Virginia Small Business Financing Authority)
International Center for Assistance, Inc.
(ICFA) (specializes in loans for small
and mid-size businesses)
http://www.redcfinance.org/ (The Richmond Economic Development Corporation)
and Incentives for Minority and
Women-Owned Small Businesses (return
Minority and women-owned
small businesses face unique challenges. Fortunately,
there are many programs geared to help them
meet these challenges and succeed.
What is a Minority
United States Small Business Administration (SBA) defines the demographic
group that includes minorities as "socially disadvantaged"
and defines that description within its website as:
individuals are those who have been subjected
to racial or ethnic prejudice or cultural
bias because of their identity as members
of a group. Social disadvantage must stem
from circumstances beyond their control. In
the absence of evidence to the contrary, individuals
who are members of the following designated
groups are presumed to be socially disadvantaged:
- Black Americans;
- Hispanic Americans;
- Native Americans (American Indians, Eskimos, Aleuts,
and Native Hawaiians);
- Asian Pacific Americans (persons with origins
from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam,
U.S. Trust Territory of the Pacific Islands (Republic of Palau),
Commonwealth of the Northern Mariana Islands, Laos, Cambodia (Kampuchea),
Taiwan; Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei,
Republic of the Marshall Islands, Federated States of Micronesia,
Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru; Subcontinent
Asian Americans (persons with origins from India, Pakistan, Bangladesh,
Sri Lanka, Bhutan, the Maldives Islands or Nepal); and
- Members of other groups designated by the SBA."
For more information about programs and resources
for minority and women-owned businesses, please
The Business Plan
You will be able to use much
of the research you have completed when compiling
and writing your business plan. The business
plan is the blueprint or map for your business.
Compare starting your business to going on
a vacation. Your vacation will go much more
smoothly with a plan. What week is best for
the whole family to be away from home? Where
do you want to go? How will you get there?
Do you need a reservation? Will you have enough
money for the trip? Without putting forethought
into the trip, you might never leave your
driveway. It’s the same with starting a business.
In order to have the best chance of a smooth
and successful venture, do some homework,
consisting of research, analysis and planning.
A business plan greatly increases your odds
of success. This CD is designed to make the
creation of your business plan easier. If
you would like to get started right now on
your business plan, click
here. Or continue reading if you would
like to analyze the research you have just
Links: Regional, Virginia and National (return
Virginia Department of Business
Center for Entrepreneurial Development
at the Community College Workforce Alliance, Verizon Entrepreneurial
Resource Center, AdvanTech, 501 E. Franklin St., Richmond, VA
College Workforce Alliance
(provides resources to help you succeed
of Virginia Home Page
business-to-government Web-based e-procurement
Richmond Chamber of Commerce
Richmond Technology Council
Business Administration (Richmond District)
Resources for Virginia
Protection Agency – Mid-Atlantic Compliance
Census Quick Facts
Center for Innovative Technology
Department of Agriculture and Consumer
Department of Business Assistance
Department of Minority Business Enterprise
Economic Development Partnership
Hispanic Chamber of Commerce
Secretary of Commerce and Trade
of Economic Analysis, Survey of Current
Business (related to business activity)
Bank of the U.S.
& Business Opportunities (Federal
Regulatory Information for America's
Business Development Agency (U.S. Dept.
of Labor, Bureau of Labor Statistics
of Transportation, Office of Small and
Disadvantaged Business Utilization
Web portal (information on small business
and Trademark Office
Lowe Foundation (information for entrepreneurs)
Association for the Self-Employed
Association of Home-Based Businesses
Association of Small Business Investment
Business Association (for small businesses)
Association of Women Business Owners
Federation of Independent Business
Corps of Retired Executives
Business Advancement National Center
Center for Assistance, Inc (ICFA) (training,
technical assistance and business loans)
Today (advocate for home-based businesses)
epodunk.com (demographic information)
Free Advice.com (Business law)
Wealth Success, Inc. (information on
The Business Search Engine
Register (Company Profiles)
Business USA (Resources for Entrepreneurs)
for Entrepreneurial Development at the
Community College Workforce Alliance,
Verizon Entrepreneurial Resource Center,
AdvanTech, 501 E. Franklin St., Richmond,
VA 23219; (804)521-4320; e-mail: email@example.com
Business Women’s Association
for Innovative Technology
College Workforce Alliance
Business Administration (on-line training)
Business Administration (Richmond District)
U.S. Department of Labor
Virginia Community College System
Department of Business Assistance
Final Decision: Analyzing the Facts (return
If the word “Analysis” makes
you shudder and recall hated classes in science
or math: relax. Analysis is just a way to
make sense out of research. Analysis helps
you figure out the answers to the questions
you had when you started your research.
Look at the list of things
you wrote down before you started your research.
If you were uncertain about the type of business
you wanted to operate, start with your list
of questions. Now look at what you wrote down
about your skills, interests and past experience.
Compare your personal expertise and passion
to information you gathered about different
industries and opportunities. By comparing
your questions (what you didn’t know) to the
answers (information you gathered during the
research process), you should be able to come
up with a viable business that you would be
both interested in starting and qualified
looking at the secondary data and primary data (if needed) that you
collected about your potential customers, you will be able to get
a clear idea of who will be interested in buying your product or service.
Knowing your customers will help you decide if your business idea
will work because you will know if you have enough buyers to be profitable.
Knowing your customers will also help you later when you put together
a marketing plan for your business. A brief form is attached here;
once you fill it out, you should know exactly who your customers will
The information you gathered on your competitors
is invaluable. From it, you can find ideas about what you should charge
for your product or service, how you should market your business,
where you should locate your business, any area not addressed by the
competition in which you could specialize, and if the competition
is too fierce in your industry. If you decide that your industry is
already choked with competitors, try to come up with a niche or specialty,
or start the research process again, choosing a different business.A
brief form is attached here;
it should help you put your research and thoughts together about your
Again, your research should
direct this decision. After completing your
research, you will know where your competitors
are located; the cost versus the benefit of
operating in different locations; and any
rules, regulations and incentives for locating
in a certain area. Armed with this knowledge,
you can evaluate the pros and cons of different
areas, and decide where to locate your business.
What Is My Business Objective?
Once you have found answers
to your questions and studied your answers,
you are ready to set your business objective.
Your objective is what you want to achieve.
It is a mission statement. For example, if
you want to start a house cleaning business,
your objective might be to “offer affordable,
reliable, high-quality cleaning service to
families in (your county, city or town).” From a main objective,
you can then decide on short and long term
goals for your business, and the strategies
you will use to reach them. Setting and reaching
these goals will be covered in the Marketing
section of the Business
Plan you will write.
Word About Marketing
your industry, setting a business objective,
choosing a location, and finding out who your
customers and competitors are, you are ready
to do some preliminary marketing analysis.
A first step in determining how to market
your business is to prepare a SWOT Analysis.
SWOT stands for “Strengths, Weaknesses, Opportunities,
and Threats.” Based on your research, you
should be able to list the strengths, weaknesses,
opportunities and threats that apply to your
business. Armed with this list, you will be
better equipped to position your product or
service in the marketplace. “Positioning”
your product or service means finding the
right way to promote it, package it, price
it, and place (where to sell and distribute)
it. A SWOT analysis is similar to making a
list of pros and cons before making a big
Jane Taylor is opening
a pet-sitting service. After doing her research, she prepares
a SWOT analysis.
experience volunteering with animal
in accounting, computers or other skills
needed to run a business
long hours & travel & need a
reliable person to take care of their
pets while they're away.
*The county in
which she lives already has two pet-sitting
services, both focused on the care of
dogs and cats.
decides to market her pet-sitting service
in a county adjacent to the one in which
she lives because the two most popular
pet-sitting services in the region do
not operate there. Because many people
in this county commute 45-minutes each
way to Richmond to work, she believes
they will need someone to give their
dogs a break while they are working.
Jane also decides to expand her business
and offer care for horses, as well as
house pets, since many of the residents
in this rural county own horses. Finally,
she decides to hire a part-time bookkeeper
to maintain the business’s records,
so that she can focus on what she loves:
taking care of animals.
To complete your own SWOT analysis, click
Analyzing the research data you collected will
help you make decisions. If you wanted to build a house, you would
first think about the type of house in which you would like to live;
you would research neighborhoods and land prices; you would talk
to architects and contractors. You would do your homework. If you
didn’t, you would end up like the pig who built the house out of
straw. You would soon be homeless. Do your homework when building
a business: finish your research and analyze your findings. Your
business will then have a sound foundation. On this foundation,
you can build the sturdy walls of a sound financial plan to hold
it together and the reliable roof of good marketing to protect it
from the elements. Then the wind and rain of competition, changing
consumer demands, and improper planning will not blow it to pieces.
Go to: Step
Two: Operating a Business
Home | What to Sell | Customers | Competition | Location | Financing | Minority
and Women-Owned Businesses | Helpful
Links | Analysis