Market Research and a Business Plan Can Help New Businesses Succeed

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The Importance of Knowing Your Industry and Having a Plan

Due to a stubbornly high unemployment rate and a long-faltering economy, many workplace experts have suggested that instead of looking for a job, people should create their own position. But beware, according to the U.S. Small Business Administration (SBA), more than 50 percent of small businesses fail in the first five years. How does the inexperienced would-be entrepreneur beat the odds? Two things can help those wanting to start their own business: strong market research and a thorough business plan.

Research the Market

Before you make the leap into business ownership, make sure a market for the business you want to own actually exists. Free market data is available on the Internet. You can learn information about the industry and the products and services that you are interested in providing with a simple Google search. Review press releases, scour reports issued by stock analysts, research firms and think tanks, and gather information released by trade industry publications as well as social media. Investigate and gather data on market competition, customer demand, needed features and services, and pricing. Don’t forget to talk with other business owners and employees who work within your desired industry.

Business Plans Can Make the Difference

After your market research is complete, the next step is to create a business plan. Many would-be entrepreneurs balk at the idea of creating a business plan as the first step on the entrepreneurial road, but take some friendly advice from experts in the field: crank up a plan and put it in writing.

A well-crafted business plan can save you a lot of grief down the road. A business plan helps you map out your business goals and how you will meet those goals. It also helps you to identify potential problems. If your business idea does not work, it crashes on paper, not in the marketplace.

A business plan not only presents your company to the public, it is a coherent tool to present to your employees. Creating a business plan will help you see whether the business you hope to start is likely to meet your personal and financial goals. Many times, an honest look at projected financial numbers can help aspiring entrepreneurs see that hoped-for profits are unlikely to materialize.

How to Create a Business Plan

Companies that know how to write a business plan tend to fare better than those that lack one. Business consultants recommend a written document that describes in detail the business you want to start and how it will become profitable. Some guiding principles are below.

1.  Begin with a statement that explains the purpose and goals of your business and how you plan to put them in action.

2.  The plan should contain a projection of profits and loss and a cash flow analysis designed to show that if the business develops as expected, it will be profitable. Drafted correctly, the plan allows the entrepreneur to explain the business’s prospects to potential lenders and investors, using financial language and tools they know and understand.

3.  Business advisors recommend you update your business plan frequently. An effective business plan is a dynamic, changeable plan that is constantly modified.

For those starting companies in fast-moving, competitive industries such as technology, some recommend creating a business model, which is a stripped down business plan that still takes advantage of spreadsheets and hard data. Creating a business model is a good idea for a business owner who lacks the time to develop a business plan before launching a business. A business model can lay the groundwork for a business plan later down the road.

The odds are not in favor of a new business surviving its first couple of years, but market research and a well-written business plan can help a new business beat the odds.

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