The Challenges of Starting a Small Business and Developing a Business Plan

Starting a small business is often an overwhelming and unpredictable venture, a surefire approach to improve profitability is developing a solid business plan. Developing a business plan will enable you to effectively execute your financial, marketing, legal, and management strategy. An inadequately developed business plan generally leads to a failing business. A business plan outlines your business strategy: the industry, business structure, products or sen/ices you will provide, and how you plan to make your business a success. Your Marketing Strategy describes and analyzes potential customers.

who and where they are, what makes them buy and also describe the competition and how you‘ll position yourself to beat it. The most imperative issue a business plan outlines is the acquisition, securing and execution of your financial plan, which is often a complex and frustrating process.

The financial section contains your income and cash flow statement, balance sheet, and other financial analyses. One of the first steps when considering starting a small business is to research Small Business Association is the onerstop shop for small business information, A local office is available in every state with resource partners to support the needs of the small business community.

All businesses require some form of financing: some of the financial sources recommended by the SBA (Small Business Association) include the following: Personal sayings: “The primary source of capital for most new businesses comes from savings and other personal resources” (sbatgov) Disadvantage: Using your personal savings can have it’s disadvantages, by using your savings for your stan up you may end up Without an emergency fund to cover unexpected expenses or situations such as automobile repairs or medical expenses.

Get quality help now

Writer Lyla

Verified

Proficient in: Bank

5 (876)

“ Have been using her for a while and please believe when I tell you, she never fail. Thanks Writer Lyla you are indeed awesome ”

+84 relevant experts are online

Hire writer

Friends and relatives: If they believe in you and your idea, friends and relatives are sometimes willing to fund you.

“Often, money is loaned interest-free or at a low interest rate, which can be beneficial when getting started.” (soagov) It is best to go about this route as a formal loan With documents stating loan terms, interest and terms of repayment. Disadvantages: Family ties and friendships can be jeopardized by small business failure. Banks and credit unions: ”The most common sources of funding are banks and credit unions, which will provide a loan if you can show that your business proposal is sound,” (sba,gov) Disadvantages: Interest charges and pressures of being successful become crucial. A lender can and often will seize assets first and then sue you if the funds realized from those assets are insufficient to pay off the loan. A lender may decide to sue you before using up the pledged assets. If the lender wins the lawsuit and gets a judgment against you, assets you haven’t specifically pledged as security are at risk, as is a portion of your future earnings.

Angel Investors and venture capital firms: “These individuals and firms help expanding companies grow in exchange for equity or partial ownership.“ (sbagov) Disadvantage: Business angels and Venture Capital firms prefer to have a say in the running of the firm, which may force the entrepreneur to give up some degree of control. Some Angel Investors may not have your best interest at heart and without the assurance of a corporate backing that come from Venture capital firms, funding through Angel Investors can sometimes be a risk. Small business owners are often dumbfounded by the number of legal issues that must be addressed when developing a business. The legal structure of the business whether it be a sole proprietorship, partnership or corporation all presents different types of legal issues and guidelines. All entrepreneurs must legally obtain an employer identification number from the IRS, a seller‘s permit from their state and a zoning permit from the local planning board.

Business owners should familiarize themselves With consumer protection laws. including rules against deceptive advertising and pricing, State consumer protection is meant to protect consumers from unfair or deceptive practices and often go beyond the traditional legal remedies available for breach of Warranty. Entrepreneurs must be aware that these laws vary with nearly every state. (nolocom) If your business grants credit, you must comply with the Federal Consumer Credit Laws. The Federal Consumer Credit Laws include The Fair Credit Billing Act, The Equal Credit Opportunity Act, The Fair Credit Reporting Act and The Fair Debt Collection Practice Act, The laws require a business owner to disclose exact credit terms to credit applicants and regulate finance charge, annual interest rates, and additional charges such as late payments. (nolo.com)

Another legal issue a business owner must be aware of is protecting its business’s sensitive information, such as business strategies, customer lists, business’s name and logo, patented inventions or processes and any creative work, Laws governing trade secrets. trademarks, patents and copyrights can help you guard the knowledge that keeps your business competitive. (nolo.com) Partnering With a spouse can often present a set of issues that do not exist a standard partnership. If you do not have a stable relationship before you start your business, you may run into conflict rather quickly. In fact, any conflicts or incompatibilities that exrsted before the venture Will only increase as a result of the added demands that each of you Will be forced to deal with.

Any family issues or concerns should be addressed before the business is started. Making a clear delineation of responsibilities in the management section of your business plan is helpful in reducing conflict by defining business decision-making responsibilities. Asolid business plan is the best way to show bankers, venture capitalists. and other investors that you are worthy of financial support. Your marketing strategy will address product development and placement, customer needs and potential profitability. A good strategy helps a business focus on the target markets it can serve best. The legal strategy Will outline how to prepare and protect your new business. In addition, a management plan will allow you to clearly define what the roles of partners or employees. including family members. A business plan is clearly an invaluable tool for all entrepreneurs.