This is the third in a series of columns that provide several helpful business topics for the new small business. It is based on one of SCORE’s recent projects and developed with the help of and in partnership with FedEx.
Don’t skip this step
You owe it yourself to take this step seriously. If you already have skills and experience in the industry you’re planning to enter, you may think this step is unnecessary. However, being an employee in an industry or excelling at a hobby is very different from starting a business in that industry or turning that hobby into a business.
Simply put, you will need to test the feasibility of your business idea by researching industry data, customer data, financial projections, possible funding sources and other information. Having done this, you will have a sample feasibility plan to use as a guide and get an overview of all the elements involved in starting a business.
SCORE developed the Simple Steps for Starting Your Business series to help you test your idea and develop a feasibility plan. Taking the Simple Steps program will give you an overview of all the elements involved in starting a business and help you get to a “go or no-go” decision about your idea. A SCORE mentor will be able to assist to get connected to this very helpful experience.
The five modules in the program are:
- Startup basics: Get an introduction to key business considerations such as the myths and realities of entrepreneurship, different business options to pursue, the components of business ownership, legal and financial considerations and business plan basics. This module gives you the understanding you need to be well informed when you evaluate your business idea.
- Defining your business concept: Do research into industry data, competitor data, customer data and more to make sure your business idea is sound. Evaluating your business idea helps you decide whether to move forward with your business concept or go back to the drawing board.
- Creating your marketing plan: Once you’re confident your business concept is sound, learn how to market your business by doing a competitive comparison, creating a product and services description, developing a pricing strategy, identifying your target markets and channels, outlining a marketing message and learning sales basics.
- Financial projections: Having a financial plan helps you create a budget and make better decisions as you start your business. In this module, you’ll learn how to build your financial model, and how to understand financial statements including an income statement, cash flow statement and balance sheet. You’ll come away understanding the value of financial planning.
- Funding sources & next steps: In this module, you’ll conduct a financial statement analysis and learn the basics of accounting and bookkeeping. You’ll also identify potential sources of capital, learn about the six C’s of credit and explore possible sources of funding. You should come away with a firm grasp on the financial potential of your business and ways to find financing if needed.
Having done this, you will have a clear overview of the journey that lies ahead of you and a better idea of exactly what it will take to reach your entrepreneurial destination. You should now feel confident your business idea is sound and have ideas for fine-tuning it to make it even stronger. You know where and how to find market research data you can use to validate the potential of your business idea and identify your ideal customers. In addition, you should have created your first financial projections, giving you estimates of your startup costs and income so you can see if these align with the personal financial resources and goals you identified.
At this point, It is time to make a go or no-go decision about your business idea. If, after this work, you’re not confident in your business idea, that’s OK. You can always work with your mentor to fine tune it a little more or abandon it completely and take some time to find a different idea.
If you’ve learned that you have a viable idea and you’re ready to move forward, take a deep breath, celebrate your progress so far, and get ready for the next phase of the journey: using the information you gathered in this section to create a business plan.
Next week: Business plan or business model canvas?
Dean Swanson is a volunteer Certified SCORE Mentor and former SCORE chapter chairman, district director and regional vice president for the North West Region.