Preparation for Planning a Business Venture
A Feasibility Study to Answer "Should I start a new business?"
Written by Carter McNamara, MBA, PhD, Authenticity Consulting, LLC. Copyright 1997-2008.
Adapted from the Field
Guide to Nonprofit Program Design, Marketing and Evaluation.
"New businesses fail usually due to poor management, not because of the idea for the business."
-- Peter Drucker, internationally renowned management expert
How to Use This Manual
Far too often, people are so eager to start a new business or product, that they end up skipping some very important considerations. This is very likely one of the major reasons that so many new businesses fail within the first five years. This manual will help you ensure that you're really ready to start your new venture.The first section of this manual is "Considerations About You". Carefully answer each of the questions in this section. The second section is "Considerations About Your Business Idea". In this section, you don't need to answer the questions in detail -- but you should be aware of how you plan to answer the questions once you've started your new venture.
Near the end of the manual, you're referred to other sites that can help you officially register your new organization once you've considered the questions -- and resources to help you answer them -- in this manual.
Table of Contents
Considerations About You
Are You Really an Entrepreneur?Have You Looked at Alternatives to Starting a Business?
Are Your Personal Finances in Shape to Start a New Business?
How Will You Manage the Stresses Involved?
Considerations About Your Business Idea - Some basic business planning
Is There Really a Market (Customers/Clients) for Your New Product/Service?What Type of Business Will You Start? (for-profit? nonprofit? what name?)
What Are the Risks Involved?
What Skills Do You Need to Run Your Business?
What Are Your General Plans for the Future of Your Business?
What Resources Will You Soon Need? (skills, facilities, money, etc.)
You're Ready to Write a Business Plan Document, If Needed
If You're Still Going to Start a New Business ..
General Resources
Numerous Sources of Additional Assistance for Startups
Are You Really an Entrepreneur?
What is an Entrepreneur?
It often takes a certain kind of person to be an entrepreneur. The following articles might help to give you some sense of the typical nature of an entrepreneur, that is, someone who starts a new venture (organization, program, product line, etc.).What is an Entrepreneur? (you might follow some of the links out of this article, too)
What Makes an Entrepreneur? (Part 1)
What Makes an Entrepreneur? (Part 2)
Another approach to understanding the nature of entrepreneurs is to interview entrepreneurs in your community. The links Networking and Interviewing for a Job might help you.
Are You an Entrepreneur? (articles to help you reflect about this question)
The following article "Are You An Entrepreneur?" helps you to get started thinking about your own nature as an entrepreneur. The article references the notion of starting a home business, but applies even if you're planning to run your business in any other setting. If you're planning to start a nonprofit (that is, if you're a social entrepreneur), you might substitute the focus on money in the following article for a focus on community service -- otherwise, the article is still relevant to your situation. Next, read "Dare to be Different".Are You an Entrepreneur?
Who Wants to Be An Entrepreneur?
5 Secrets of the Authentic Entrepreneur
The Right Stuff
So You Want to Start a Business?
Are You an Entrepreneur? (self-tests to help you decide if you're an entrepreneur)
The following self-tests might help you to think about your nature and how you'll handle the risks and stresses of starting a new organization. These tests are not comprehensive and scientifically validated. But they do pose useful questions to think about now.Self-Taking Personal Flexibility Assessment (includes self-scoring)
Measure Your Entrepreneurial Quotient
Entrepreneurial Test
Additional reading, if you prefer
Why
People Start Companies
Also consider these library topics:
The topic Personal Development includes many more self-assessments.
Consider Alternatives to Starting a Business?
Sometimes people try start their own business (for-profit or nonprofit) because they're frustrated with their lives or current jobs. These are valid reasons. But starting a business can cause even more frustration! There are alternatives that should be considered before you start a new business. NOTE: In the next section, titled "Resources to Help You Explore Alternatives Other Than Starting a Business", there are resources that can help you answer each of the following questions.)1. How about working to improve your attitude toward
your life or work?
The frustrations of starting a new business might make
your attitude even worse for you -- and those around you.
2. How about working to get promoted in your current
job?
This option lets you work from current strengths to shore up areas
where you might need growth, and you can usually keep your current
benefits and level of income, as well.
3. How about finding a new job?
This can be much easier than starting a new business.
You might even consider getting a part-time job to phase yourself
into the full-time role of running your new business. Sometimes
just the activity of interviewing with other companies can remind
you of your value, and improve your attitude in your current job.
4. (For those of you who are thinking about starting
a new for-profit business) How about buying an existing business?
An existing business already has products/services, customers
and a financial track record.
Resources to Help You Explore Alternatives Other Than Starting a Business
1. Personal Development -- This topics includes assessments to help you identify areas where you might want to grow. The topic also has materials to help you set goals and reach them, as well, including by going back to school.2. Personal Productivity -- This topic includes materials to help you become more effective in your life and work.
3. Personal Wellness -- Materials in this topic can help you to focus more attention on your attitude, personal motivation and overall sense of well being.
4. Employee Performance Management - Materials in this topic can help you identify performance goals and get help from your supervisor to reach those goals.
5. For-Profit and Nonprofit Jobs -- There are vast number of online resources to help you think about, prepare for and find a new job. Consider working from home.
6. Buying a Business -- This topic will be useful for those of you who are considering buying a current for-profit business.
Are Your Personal Finances in Shape?
It's likely that your personal income will be affected if you start a new business, particularly if you have to invest any of your personal finances in your new business. You should consider where your money will come from while you're getting your new business off the ground. Where will you get benefits, such as health insurance, auto insurance, life insurance, etc?You should take stock of your finances. Potential funders may want to understand your personal financial situation -- and will be impressed if you've done thorough planning and documentation.
The topic Introduction to
Personal Financial Planning includes references to a variety
useful materials about Basics
of Personal Financial Planning, Budgeting,
Insurance Planning,
Savings, Consumer Credit and
Debts, Investing,
Tax Planning,
Retirement Planning,
Estate Planning
and Estimating
Your Net Worth.
How Will You Manage the Stresses Involved?
Most people assume that there are many stresses involved in getting a new venture off the ground. Few people really prepare for them. They're too eager to get the new business going. You very likely won't be able successfully to manage the new business for the long term if you can't successfully manage yourself as well.
Consider some of the materials in the following key topics.
Staying Motivated and Keeping a Good Attitude (to avoid Burnout and Cynicism)Stress Management (including Physical Fitness) -- There are several basic things you can do that go a long way toward managing yourself. The following articles provide a variety of perspectives and advice.
Time management -- Managing cash is usually the biggest challenge in running a small for-profit business. Getting funding is usually one of the biggest challenges in a small nonprofit. Time management is usually one of the biggest challenges in managing yourself!
Mentoring -- Find someone who is willing to help you with ongoing advice. You're not the first person to start a new venture.
Work-Life Balance -- The best way to manage time and stress is to have a life other than just your new venture.
Managing Interpersonal Conflicts and Handling Difficult People -- If you're stressed out, it'll seem like everyone else is, too.
Resources for Nonprofits or Resources for For-Profits -- There are plenty of sources of free help. It's amazing how we fail to take advantage of resources unless we have to pay for them!
Basics for New Managers and Supervisors to Manage Themselves
Basics for New Managers and Supervisors to Manage ThemselvesAt this point, you need not have detailed answers to the following questions. But you should be thinking about how you will get answers to them.
Is There Really a Need for Your New Business?
Sometimes people get so excited about their idea for a new product or service, that they almost become obsessed with the idea of starting their own new business -- without really verifying if there really is a market for their new product or service in the first place! Some basic business planning can go a long way toward verifying if there's a market, and whether you're really committed to starting a new business. If you don't have the commitment to do some basic business planning, you might be fooling yourself about whether you have the commitment to start and run a business. Do some up-front, basic business planning!The following basic questions address many of the critical considerations when starting a new business. Next to each question is a recommended topic from the Free Management Library.
NOTE: If you'll need funding to start your new for-profit or nonprofit business, investors or funders are much more likely to provide money to you if they see that you've done some business planning.
NOTE: In each topic are links to related topics as well.
1. What is the nature of your new "product"
for your new business?
Is it retail? Manufacturing? Service? Wholesaling? The answer
to this question will guide you to a wide variety of helpful resources
by contacting trade associations for retail, manufacturing, services
or wholesaling. (If your product is primarily a service to the
community, you may want to consider starting a nonprofit organization
(more about that later on in this library). The topic Two
Basic Types of Business Organizations: For-Profit and Nonprofit
will help you answer this question. (Nonprofit entrepreneurs may
also benefit from the topics Social Entrepreneurship1 and The
Unique Needs and Nature of Nonprofits.)
2. How do you know there is a need for your new product
or service?
You'll have to do more than "sense that there is
a need" or claim that "it's common sense that there
is a need". You'll have to have enough evidence to convince
an investor or funder -- and yourself. Read information at a few
of the links in Marketing
Research to help you. (Nonprofit entrepreneurs should strongly
consider collaborating with an existing nonprofit, rather than
starting a new nonprofit that might end up competing for the same
funds. To see if a relevant nonprofit already exists, you might
contact your local office of the National
Council of Nonprofit Associations or use the GuideStar.
3. Who are your competitors? What makes your new product/service
any different or more needed by customers?
The links Competitive
Analysis and Positioning
will help you.
Also see:
Matching Personal Interests With Marketplace Needs
What Type of Business Will You Be Starting?
1. What is the basic purpose of your business? (This is your mission statement.)You will need to specify this mission statement to investors or funders, to register your legal form, to provide continued guidance to major decisions, etc. The topic Developing/Updating a Mission Statement will help you answer this question.
2. What type of organization will your new business be?
For-profit? Nonprofit?
The topic Two Basic Types
of Business Organizations: For-Profit and Nonprofit will help
you answer this question. Nonprofit entrepreneurs may also benefit
from the topics Social Entrepreneurship1
and The Unique Needs
and Nature of Nonprofits.
3. What will be the legal description of your organization?
For example, unincorporated (sole proprietorship or partnership)?
Corporation (S, C) or Limited Liability Company? Another type
(nonprofit, cooperative, association, franchise, etc.)? See
Enterprise Law
4. What will you name your new organization, or new product/services?
The links Naming and
Branding and Intellectual
Property Law (about trademarks, copyright and patents) can
help you.
5. Might you carry out your business primarily over the
Internet? Might you carry out your business primarily by working
from home?
The link One
Basic Overview of E-Commerce will be helpful to you.
What Are the Risks Involved?
Questions -- What Risks Do You Face? (your risk management plan)
1. What can go wrong that would really hurt you and the new organization?The topic Risk Managementwill help you.
2. What insurance coverage do you need?
What coverage do you have? Is it enough? The topic Insurance
(Business)will help you.
3. How can you minimize the likelihood of employee litigation
against you?
You will soon need to implement a set of personnel policies and
ensure they are followed by your staff (to minimize the chance
of litigation). The topic Policies
(Personnel) will help you.
What Skills Do You Need to Run Your Business?
Questions About Financial Management
1.How will you manage your finances?How will you monitor and record your income and expenses? Do you know how to prepare and manage a budget? Cash flow statement? Balance sheet? The links Finances (For-Profit)or Finances (Nonprofit) will help you.
2. What system will you use for bookkeeping and accounting?
The links Finances (For-Profit)or
Finances (Nonprofit)
will help you.
3. How will you compute your taxes?
What forms must you use? The link Taxation
will help you.
Questions About Personnel Management
1. How will you attract and retain the best people?The topics Recruiting, Retaining Employees and Basic Guide to Management and Supervision will help you.
2. How will you know how to organize your staff?
The links Workforce
planning, Specifying
Jobs and Roles and Selecting Your Organizational
Design (who will work for whom, etc.) will help you. For those
starting nonprofits, the links Key
Roles and Structures in Nonprofits and Three Aspects of Nonprofit
Structure and will help you.
3. How will you compensate employees? What benefits will
you offer?
The topic Benefits and Compensation
will help you.
4. How will you know what basic personnel policies you'll
need?
The topic Policies
(Personnel) will help you.
5. How will you know how to manage your organization?
The topic Broad List of Knowledge
Areas and Skills in Management (you don't have to master all
these skills to start an organization) will help you. Also consider
Boards of Directors, Chief
Executive Role, Basic Overview of Supervision and Management
Skills Unique to Nonprofits (for nonprofits).
6. How will you ensure personnel are effectively working
toward the organization's goals?
The topic Employee
Performance Management will help you.
NOTE: A key resource to help you manage and supervise people is Basic Guide to Management and Supervision.
What Are Your Plans for Your Business?
You need to think about some strategic decisions. While you may not have to know the detail to answers about the near future of your new business, you should have some impression about the overall goals to accomplish. Knowledge of these goals will help you a great deal when thinking about what resources and skills you will need right away in your new business. Think about your answers to the above questions so far when identifying your plans. 1. What are the major goals for your organization over the next three years?Think about your answers to the above questions so far. The link Strategic Analysis will also help you.
2. What do you need to do to reach those goals?
The link Setting
Strategic Direction will help you.
3. What objectives do you need to reach along the way
to each goal?
Who needs to be doing what and by when in order to reach each
objective? The link Action
Planning will help you.
4. How will you know that the organization is efficiently
pursuing its goals?
The links Coordinating Activities
will help you.
What Human Resources Will Your New Business Need?
1. What skills (and people) are needed by your organization?Consider your answers to the above questions about how you'll carry out marketing, and financial management and personnel management. Will you get these skills by hiring, outsourcing or training?
2. Do you have a banker? Financial adviser? Tax advisor?
Lawyer?
The topics Getting
and Using Banker, Getting
and Using a Consultant, Getting
and Using a Lawyer and Getting
and Using an Accountant will help you.
What Facilities and Equipment Will Your New Business Need?
1. What equipment needs will you have?(These needs depend very much on the resources needed to develop, distribute and support your product/service.) The link Facilities Management might be helpful to you.
2. What computer equipment will you need?
The link Computers,
Internet & Web will help you.
How Much Money Will You Need?
What is the Cost of Needed Resources?
Consider the costs to obtain the necessary skills, facilities and equipment identified from addressing the above questions.For nonprofit entrepreneurs, the links Designing a Budget and Fundraising (Nonprofit) will help you.
For for-profit entrepreneurs, the links Designing a Budget and Fundraising (For-Profit) will help you.
Writing a Basic Business Plan Document, If Needed
The following link "Basics of Business Planning" provides resources to help you write a basic business plan document. If you've addressed the above questions in this manual, then you've already gone through most of the basic business planning process (Congratulations!). The "Basics of Business Planning" resources will also help you expand and fine tune the business planning you have already done.You may not be required to develop a business plan document.
Various funders (foundations, corporations, banks, etc.) require
a business plan document. The document can help you immensely
as means to track your plans and progress toward implementing
your plans.
Basics
of Business Planning
If You're Still Going to Start a New Business ...
If, at this point, you have carefully answered the above critical questions, then congratulations! You are indeed very serious about starting a new business -- and you're that much more likely to succeed! We're ready to move on.If you're considering a for-profit business, see
Starting a for-profit business
If you're considering a nonprofit business, see
Starting a nonprofit organization
Sources of Additional Assistance for Startups
Resources for For-ProfitsResources for Nonprofits
For the Category of Entrepreneurship (For-Profit):
Related Library Topics
Recommended Books
Starting a For-Profit Business
Starting New Ventures for a Current Business
Starting a For-Profit Business
The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just hover your cursor over the image of the book. A "bubble" of information will be displayed. You can click on the title of the book in that bubble to get more information, too.
Starting New Ventures for a Current Business
The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just hover your cursor over the image of the book. A "bubble" of information will be displayed. You can click on the title of the book in that bubble to get more information, too.
