It’s true that to start a business, you’ll need a business plan of some kind. At the very least, to receive a business loan, your bank will want to take a look at one. Despite this, a lot of small businesses (especially sole proprietors) never get around to developing a plan, or believe they don’t need one.
The Pixel Foundry business plan took a while to write, partly because it was our first time being serious about starting up a company… but mostly because Statistics Canada is useless when it comes to properly categorizing and tabulating information on our industry. For us, the market research was the most difficult part of the entire writing process.
There are many good reasons to write a business plan. We decided against the bank loan route, but still needed the written document… here’s why:
- The marketing plan section forced us to consider where we’re going to find our clients and how to reach them. From what I’ve seen with friends who’ve started up a business, this is where small businesses tend to fail. If you build it, they won’t come… because they don’t know you exist. Spend some time on this area and the financials – even if you don’t write a formal business plan – is my advice.
- The financials section gave us a breakdown to let us know exactly how much we need to break even, pay ourselves salary, or grow and expand our business. From this, we could extrapolate how many projects we should take on per month, what our hourly rate should be, and how many clients we should aim to work with ongoing. Nearly every freelancer or small design studio charges too little at first, and we were no exception, but having these numbers prevented us from pricing ourselves into a corner.
- The research section made us scope out the competition. This helps you develop your USP (more on that in another blog post) and find out if you are even offering something people want. We also gained information on how much other small design studios and freelancers charge, and what their portfolios include.
- We worked on an exact list of goals over a 2 year period, including when to lease an office, when to hire freelancers to help out with work, and how many new clients we wanted per month. Remarkably, we’re close to our goals, perhaps because we set them with realistic expectations. It’s easy to get caught up in the grind of producing work… this goal-setting keeps you focused on the true reasons you’re starting a small business instead of working for someone else.
- We knew what equipment, software, office space, and expenses would be before we even looked at whether or not we needed a loan. It turns out we didn’t need to go through the hassle of a business loan, since we didn’t have much for overhead. Too many people think they can’t start a small business without a huge investment. It helps, but if you’re tough, you can sacrifice for a while and be financially independent from the start.
If you don’t want to go through the process of writing a business plan, I’d urge you to at least write a goals sheet, financial statement, and marketing plan. These are the sections we have found the most helpful. You’ll probably find out later that your numbers were wrong, your marketing plan needed adjusting, and your goals weren’t realistic. Keep revising your business plan and referring to it… it is not a static document to be filed away!
Small Business BC offers an interactive business planner. Other samples and templates exist online.
