Part 3 - Starting an Online Business - Planning

It is tempting it is to jump right in with both feet - especially once you have solid evidence that you have a great product idea and an audience that wants it. But preparation is vitally important; it will help you to anticipate potential problems or issues, and keep you organized - you'll be more likely to do everything you need to do, rather than facing an unexpected problem in a panic later on. It is time now to move in to the planning stage of your business.

There are several things you need to think about.

• How will you arrange your time? You cannot build a business in your spare time, although you can build one part-time. What time commitments can you make on a consistent basis?
• What is your work area like? Do you have a quiet, private place from which you can build your business without worrying about other people getting into your files? It might sound trivial, but it really isn't. Imagine if you put a great deal of time and effort into writing up a business plan, and before you could back it up, someone used your computer and accidentally deleted the file or crashed the machine!
• What are your startup costs? How much will you need to develop your product? Are there special materials, software, or research you'll need? Create a list of necessities, plus a list of things that would be " nice to have". Then figure out where you'll get the money.
• Do you have a business and marketing plan? Both will give you a " blueprint" of what you want to do. They'll provide your business with direction and goals.
• What sort of bookkeeping are you going to use?. No doubt you will make purchases for your business. Come up with a simple but effective bookkeeping system so that you don’t have to scrounge around for receipts or invoices when it comes time to do taxes. Talk to your accountant for bookkeeping suggestions.
  

The US Small Business Association website is a great place to get some general business startup information.

• What are your production and marketing costs? You're in business to make money!
  • How much would you need to sell the product/service for in order to make a decent profit (after paying all expenses)?
  • How much would you like to be paid after everything is said and done? A service such as web design requires a far greater time-commitment than, say, writing a book and continuing to sell it "forever".
  • How much do you have to invest in the development of your product?
  • Do you need any special software or other materials to create it?
  • How will you reach your prospects and what are your estimated costs?
  
  
• Are you going to have shipping and inventory costs?
  • Do you sell a tangible product or one that can be delivered electronically?
  • Instant delivery over the Internet is very cheap, whereas a physical good that has to be packaged or shipped will incur extra costs. There are also many companies that will “drop ship” products for you. You would never have to actually handle the product.
    


• How will you handle customer support?
  • How much support will you need to provide your customers? Obviously you should do everything you reasonably can to keep your customers happy. Factor in the amount of time you think you'll need to spend on support requests.
  • Will you need to hire additional staff to help you with support? For some products and services, such as technical support for a software product, it is reasonable and even accepted to charge support fees.
    

• What will you have to pay your credit card processor or pay for your merchant account?
  • How much do you have to pay your order processor in fees? For example, many third-party merchant providers take between 10 and 25 percent of your gross sale.
    


• Have you created a business plan? This is one of the most important steps in the planning process. Gather the information and research that you have collected and organize it in to a concise business plan. In most cases you will need this if you are going to apply for a loan. Even if you are not going to apply for a loan it is a good idea to have a business plan because this will give your business form and meaning. It will help you to anticipate problems, allocate resources (financial or otherwise), set clear and measurable goals, and in general, it acts as a guide to help you make the right business decisions.

There's a lot of information on how to create a business plan; one great source is the US Small Business Association's Business Plan Outline.

Another site for information on writing a business plan is Aboutus.com in an article called Creating Business Plans For The Independent Inventor.

Most experts agree on the basics of what should be included in a business plan.

This is what they state are the important areas:

• Overview Summary: Outline your business idea (introduction).
• Mission Statement: What is your ultimate goal or purpose?
• Company Information: Provide information about when your company was founded, what it does, its legal structure, where its located, etc.
• Product or Service: Describe what you offer, how is it created, how is it unique? Refer to brochures and literature if asking for money.
• Market:
  • Who are your customers?
  • Where are they located?
  • How will you reach them?
  • What is your marketing plan (advertising, promotion, etc.)?
• Competition:
  • Who else out there offers what you do?
  • How does your business differ from theirs?
• Liability/Opportunity:
  • What risks are you facing and how will you overcome them (i.e. financing)?
  • What opportunities are there that you can take advantage of?
• Management: Who is involved in your business and what is their experience? Be sure to include yourself.
• Capital Requirements: Even if you aren't asking for money to fund your venture, you should have information regarding start-up expenses. Often starting a business costs more than anticipated because there are more fees and small expenses than expected.
• Financial Plan: This includes income statements, cash flow and break even analysis, balance sheet summary and sales summary.
• Appendices: Use literature, brochures, charts and the like to illustrate points in your plan.

There are countless web sites with information about writing business plans. Do a search on Goggle, Yahoo, MSN or what ever search engine you prefer and you will have hundreds of articles at your fingertips. Or, if you prefer, you can hire some one to write your business plan. Places like Elance.com and Guru.com have freelance people eager to do work. You can also consult a professional financial advisor.

Do you need a business license? Once you have all this in place then you must begin to get your business license. In most areas you will need to get a business license or permit. For small home based businesses this runs about $35 to $50 per year depending on how much money you make. You should check with your local business office to find out about fees in your area. There is usually a one-page application that is pretty straightforward. Your locality will issue a business certificate or license that you are required to display. It's very exciting to have a business license...it makes you feel legit! So frame it and display it in your office. To find out about business licenses in your community, look in the local government pages of your phone book usually under licenses and permits although this differs depending on how your phone book is indexed. There should be an entry indicating business licenses. If you can’t find a business-related number, try calling another local government office, the Chamber of Commerce or your local Small Business Administration. Perhaps you'll get lucky and live in an area that does not require you to get a business license, but none the less you need to check in to it to be safe.

Do you need a tax permit? If you are selling tangible goods you may also need a sales tax permit if there is sales tax in your state. The people at the business license office will be able to help you determine if you need a sales tax permit and refer you to the appropriate place. In some cases the business tax people have the sales tax paperwork in their office. The sales tax permit allows you to collect sales tax (and pay it to the state). It can also allow you to buy items you need to create your product without paying sales tax.

Do you need to pay Personal Property/Business Tax? Check to see if you need to pay some sort of business tax or personal property tax on your business equipment. Your local personal property tax office should be able to help you with this.

Do you need to fill out a Fictitious Name Statement? Have you named your business? If your business name is something other than your given name, you will likely need to fill out a fictitious name statement also known as DBA, Doing Business As. This statement is to notify the public that you are the person doing business under the business name. It is usually printed in the paper. Your local business office should be able to tell you how this is done as well.

Once you have all this in place and you are ready to open your business, you need to begin marketing your business. This is a never ending process. (read next article Marketing and More Marketing)