Why you need a business plan to make money

If you have been thinking about starting up a little side business recently, or want to go out and become your own boss you need to really start the process by developing a business plan.  A business plan is the best way to make sure you are on your way to success and can either save you money or help you to make money in the long run.

A lot of businesses fail, their owners might go bankrupt or lose all of their savings, on an idea that they had that they thought would take off and make them rich but in the end they rushed into it before really dealing with the idea, and developing a plan for success.

So what can you do to make sure that your business idea flourishes and you can prevent any nasty surprises?  Well, I have written a list of steps you should follow before you do anything.  If you want to really make money from your hobby or business idea you need to start acting like it is a business from the start, so get a pen and paper and think about the following.

1.  Define your idea

Is it a service or a real product that you plan on selling?  Really flesh it out and work through all of your thoughts, concept and strategy.  Some questions to think about are, is this already available?  What is your competition?  Is it something you are passionate about? A lot of people change direction in their lives to something that they don’t actually have much interest in it, but think it is a well paid area or something that they can make a lot of money quickly from but in reality without passion for something you will never be able to succeed with it.

2.  Test your idea

Once you have really defined your idea for your business then start to test it.  This could include some market research, bouncing the idea off some professionals, such as your accountant, or even just friends and family.  A lot of people will set aside a small budget to setup a basic webpage just to collect some info and pay for some Google Adwords.  You might set aside $500 for this and see what the response is like.  You don’t even have to have finished the product yet but collect their details, ask what they would want from your product or service and see what the response is like.  If you don’t get any traffic then maybe people aren’t looking for what your offering…

3.  Decide to proceed or not

Some of the most successful people in business know when to say no.  This might be very hard, especially if your passionate about your idea but if it looks like it won’t work out, don’t waste your time, money and risk losing everything on something that is most likely going to fail anyway.  The principle, throwing a whole lot of mud at the wall, and some of it will stick doesn’t apply to a new business.  If your aiming at something that can’t be reached, then you still won’t hit the target, no matter how much resources and time, energy etc you put into it.  Sometimes its better to realise ok, I need to go back to step 1 and redfine my idea, or perhaps look into a different area that your passionate about.

4.  Proceed with more planning

So your ready to give it a go.  You have a great idea and you want to take it to the world…or at least your local neighborhood.  Start by documenting everything down, such as your goals, your costs, your ambitions, the risks, the obstacles and competition.  You could do this via flowcharts or spreadsheets, whatever works.  Be aware of everything from the start.  If you need to get a product developed, how much is it going to cost you?  How much do you need to sell the product for to break even and make a profit?  How many products or services do you need to sell a week?  A day?

I’m not going to go into heaps of detail here as this is a massive area.  My advice would be to seek some professional advice from a local expert as whatever I say will be subject to your individual needs, idea, concept and country where your based.  You might need to seek legal advice as well to make sure you are abiding by the local laws and rules.

5.  Review

After you have developed your business plan, I strongly urge you to review it regurlarly.  Is it still relevant, based on what you know now, has it changed since you wrote it.  Are you heading in the same direction you wanted to 12 months ago?

The final point I would like to make is that most businesses struggle in their early years.  Take some massive companies like Google and Microsoft for instance.  Both of whom started from a garage with a handful of people.  Don’t expect to get rich overnight.  Work at it, do everything carefully and don’t take risks that aren’t worth taking.  Unless you can back it up by some serious market research its probably better to save your money and put it into an existing company via shares or even just a cash deposit account than waste it on a business that was never destined to succeed.

Good luck!