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Developing a Business Plan

Expert: Julie King

Mike asked:

I've been in construction for the past 8 years. Recently since moving back to Winnipeg I've been doing a lot of side jobs (carpentry) for friends, strictly for beers you know, as favours.

Everybody seems to like the work I do and they keep saying I should start my own business. I would love to but don't really have the tools or business strategy and my job keeps me really busy so most of this work is done on the weekends borrowing tools from friends and such.

Want to start looking to do this for a living one day but need the financial security of my current job to pay the bills. Wondering what steps I should take to branch out for more work and when I'm ready for that. Want to make sure my butt is covered. I'm 26 now and would like to be doing this full time by the time I'm 30.

Julie King answered:

Great question, and congratulations on having the foresight to start planning early.

It usually takes 3-5 years for a business to become really established, so having 4 years to work on building your company before leaving full time work can be a tremendous advantage. It will give you time to purchase tools, take care of the administrative set-up, develop an understanding of your market, and put some money aside.

When starting out in business, local business resource centres can be a great help. In Manitoba, the Small Business & Cooperative Development Branch, provides information and consulting to new businesses, seems to be an ideal starting point.

Many organizations will encourage you to develop a business plan. If you want to take advantage of a financing program like the provincial government's Business Start Program (BSP), a business plan will likely be a requirement. Creating a business plan does not have to be a daunting process, and here I speak from experience. I've written several business plans and in 1997/98 our company won the National Business Plan Competition for Young Entrepreneurs.

A business plan is just a written version of your business concept. It will address the considerations that anyone needs to look at as they are starting a business: the money, the management, and the marketing and sales. Since you'll be self-employed and probably won't have employees (at least when you're getting started), money and sales will be your 2 biggest considerations.

The research
Four years gives you a lot of time to do research, and in particular market research.

You'll want to identify competitors, find out what they are charging. Also, talk to as many potential customers as possible. What services are they interested in? What are they willing to pay for? Can you develop a niche, for example, helping retired people maintain the homes they own.

Doing this research will help you predict how much money you will need to get started. It will also help you narrow down the opportunities and define your business strategy.

The money
How much money do you need to start your business? What expenses do you expect to have? How much will you charge? What about taxes?

These things aren't complicated, but they are also not something that can be explained in one email. The best option for entrepreneurs starting out is to attend a course designed to teach entrepreneurs the basics on this topic. Get ready to learn about budgeting, cashflow, break even points, and financing! Your local business resource centre will probably offer a course, and it may even be free.

One of the most challenging things about starting a new business is the financing, so do everything you can do over the next 4 years that will help you secure financing.

Marketing & Sales
To the self-employed person, the ability to successfully sign up customers is critical to survival. What's even more important is being able to cover your operating costs (what you need to survive and pay for food, rent, etc.) and make a profit on top of that. This ties into money in the sense that you need to consider how much of your time will actually be spent doing billable work, and then set your rates accordingly. It's common for new entrepreneurs to look at the whole work week as billable time, but in reality you may spend 30-50% of your time during the year doing sales and administrative work. At the same time, you'll need to offer competitive rates.

Marketing typically has a long-term focus, building an awareness of the company, its products/services, and its uniqueness (turn around time, quality of craftsmanship, customer service, etc.). Sales tends to focus on the short term; creating leads and then turning those leads into buying customers.

Once again, consider taking a course or two offered at your local resource centre so that you can familiarize yourself with this topic. Also, it's important to understand that marketing and sales are not identical.

You'll also find that having four years to slowly develop a customer base will really help. It may be challenging to balance your day job with self-employed work, but the benefit of being able to develop a customer base will be tremendous.

Further resources
• For anyone just getting started, I'd highly recommend that you pick up a copy of this book:
The E-Myth Contractor
by Michael E. Gerber
ISBN 0-06-621468-8

• Writing a business plan

• Starting a business guide

About the author

Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.

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