Begin with a Plan: Marketing a home business begins with knowing what will be sold, who are the target customers and at what price it needs to be sold.  You can’t begin marketing a home business before having a sound marketing plan with these details fine tuned.

Take Expert Help: The product or service is known best by the person starting the company.  Yet, hiring someone to create a marketing concept might be necessary.  In marketing a home business, it is important to utilize all the resources available.  It may include using a professional writer, web developer, advertising agency or any other third-party resources as required.

Build a Website: A website is a necessity for marketing a home business.  One would not like to be not present when someone searches for their business online.  Having a professional website with detailed information about products and services also puts across a professional image of the business.

Use Search Engine Marketing: Google and other search engines present a great avenue for marketing a home business.  What can be better than being able to put your business in front of the people who are searching for the products or services your business offers.  Start with a keyword research tool to come up with keywords related to your business.  Take those keywords and plug them into Google Adwords.  When marketing a home business, most people do not have a lot of funds and, thus, going with highly used keywords with low competition is essential to success.

Use Social Media: Those marketing a home business online cannot afford to ignore social media sites such as Facebook, Twitter, LinkedIn etc.  Social media is all about conversations and can get the word about your business out to lots of people very quickly.  The key to successful social media marketing strategy is to come across as a genuine participant in the conversation and  following a disciplined and consistent approach in getting the word about the business.

Start Blogging: Blogging for marketing a home business is almost necessary these days.  A blog acts a mouthpiece for a business and helps engage its customers.  A free blog at WordPress or any other platform is a nice way to start.

Don’t Forget Offline Networks: Offline social networks and communities have long existed, much before online social networks came into picture.  In marketing a home business, one of the most economical options is to leverage these offline social networks.  A home business owner must participate in such social communities and events as these really can prove to be great tools in marketing a home business.

Business Plan Outline

Executive Summary

The Executive Summary is the first section of the business plan, but, you will usually write it last after writing all other sections of the plan.  The Executive Summary provides the reader an overview of your business, its history and future plans.  The success of your business plan often depends on how interesting the Executive Summary is.

Market, Opportunity & Competition Analysis

In this section, you will describe the business opportunity, define the target market including its size, demographics, trends and special characteristics.  You will also need to provide an overview of the industry at large, analyze the competition and understand regulatory and other market conditions.

Business & Product and Service Lineup

In the business description part, you will give the reader an overview of the business you’re in and what will make the business successful.  You will also describe the products and services that the business offers to the customers along with the details like the development stage of the product or service, its benefit to the customers and its competitive strengths.

Management & Organization

The management and organization structure provides details about the key members of the management team, organizational hierarchy and key positions in the organization.  You will also describe the key roles and provide details of who is going to man those roles.  Apart from the management and ownership of responsibilities, you will also need to provide the legal structure of your organization and details of its ownership including the business type, owners and type of ownership.

Marketing Plan

The Marketing Plan section will provide the reader insight into your sales and marketing activities.  You will need to provide details about each element of marketing mix in your business i.e. the Product, Price, Place or Distribution and Promotion.  You will define how you are going to reach out to the potential customers and how you will make sure that the product is available to the channels accessible to your target market.

Operating Plan

The Operating Plan section of the business plan is used to define the business operations process, describe the location of the business and land, building, plant, machinery, equipments and human resources required to successfully deliver products and services to the customer.  This section also provides details about other elements of the delivery or manufacturing process such as the suppliers and the core delivery process itself.

Financial Plan

The financial plan or financial management section provides the reader an insight into the financial history of the business, if available, and the future financial projections.  You will need to include your detailed financial statements such as the balance sheet, pro forma profit and loss account and cash flow statement for the next three to five year depending on the requirements.

Apart from the core elements of the business plan outline mentioned above, you will also have other data, information, and research reports that you will need to keep handy.  You can use the appendix section to provide all the additional data and information.

A good business plan outline is just meant to guide you on how to write a business plan; however, each business plan is unique and you will need to decide on the importance and relevance of each section according to the needs of your business.

While there are several ways to create an operating plan, we recommend starting with a SIPOC which is a handy tool to understand the entire business process starting from the source of inputs to the receiver of output.  SIPOC is an acronym for Supplier, Input, Process, Output and Customer.  You can use a SIPOC to draw a process that shows your business activity at a high level as well as break it down to each activity level.  Creating a SIPOC is fairly easy; see an example of a Pizza business below (click to enlarge the image).

Writing a Business Plan: Operating Plan Essentials

Once you have created the SIPOC for your business, you will know some of the most essential components of your operating plan and answers to questions like:

• Who are the suppliers?
• What goes into making the final product or service?
• What equipments, machinery etc. are required to create the product or service?
• How each unit is produced?
• Which activities are performed on a daily basis?
• What are the human resource requirements of the business?

Apart from these, you can also find out several other aspects of your business, for example, the time taken to complete the production process, people involved in each stage of the production process etc.

What Should be Included in an Operating Plan

An operating plan is a unique description of your business’s production process and should only cover issues specific to your business.  While we have provided an operating plan outline, you may not be able to include all the parts or some of them may not be applicable to your business at all, for example, describing how the inventory will be managed is critical to a retail business; however, it may not be required for a consultancy business at all.

Another point to consider here is the purpose of the operating plan.  If you are going to use the operating plan as an internal tool, you should try to make it as detailed as possible.  However, if you are going to use it as part of the business plan to raise funds then you need to make it easy to understand and avoid getting into complexities of business.

Business Plan Writing: Operating Plan Outline

After SIPOC, the next stage is to describe all the findings in your operating plan for the reader.  An operating plan, depending on the type of business, needs to cover some or all of the following:

Production or Manufacturing Process

Every business, irrespective of whether it manufactures something or not, produces or provides an item of value of that the customer pays for.  In this part of the operating plan, you may want to explain the process of producing a unit of output, the time required to produce each unit, the labor requirements, etc.

Plant, machinery and equipments

In some business, the physical plant, machinery and equipments play a major role.  For non-manufacturing businesses such as a retail outlet, the plant is the space used to attend customers and store and display products.  In all cases, you need to describe the land, buildings, machinery, tools etc. that are required to run your business and why they are important.  Explain how your business will obtain all these things, for eg: lease for land and building, financing for machinery etc.  For some business such as a restaurant, the location itself is very important and you may want to describe the benefits associated with the location of your business in the operating plan.

Production capacity

Describe how many units your production facilities and human resources can produce in a given period of time.  Is  your production process scalable to produce more units, if required?

Human resources

How many people do you need to employ and are there any special skills required in them.  What is the availability of skilled labor and how are they employed by your business, full time, part-time, contract basis?  In case your business offers some kind of services, for example, auto repair, it is important to explain in your operating plan how do you ensure consistent supply of skilled labor.

Materials and Suppliers

Explain in your operating plan, what materials are required to produce your product or service, who are the suppliers, are there any special arrangements with suppliers, do you have a backup source in case a supplier fails to provide the raw material, and what terms you have negotiated with the suppliers.  It is important to keep a healthy relationship with your key suppliers and also maintain a backup for times when your primary supplier fails to deliver the required materials.

Inventory

Explain how you will manage the inventory.  Inventory management is critical for businesses, and trivial too, as maintaining high inventory levels can be a huge cost in itself and maintaining low inventory levels sometimes leads to missed sales.  In your operating plan you need to describe how do you ensure that optimum levels of inventory are maintained at all times.

Customer Service and Support

Some business types need to provide support and customer service after the product or service has been sold.  This becomes essential in case of technical products or services.  In some cases, the support and services become revenue generating mechanisms for the business, for example, a company selling CRM software may also sell implementation and training services.  In all such cases where customer service and support is the core differentiator, a revenue stream or a necessity, you need to include it as part of your operating plan.

The objective of creating an operating plan is to let the reader know that you understand the requirements and methods of producing your product or service.  A good operating plan should introduce the production process and essentials to the reader in a way that is easy to grasp.

Financial Plan: The Essentials

The financial plan for an established business will need to include the historical financial data, usually for the last three to five years, depending on the time business has been in operation.  This will include the profit and loss statements, cash flow statements and balance sheets for each year.  It will be good idea to include the externally audited statements because that will add credibility to the numbers that you are going to present.  The potential investors want to look at the past financial data to understand how the cash is managed in the business, for how long the business has been in profit (or loss), major expense lines, the assets owned by the business, and the liabilities of the business.

In addition to the historical data, the investors also want to know how the business will perform financially in the future.  For this you will need to provide financial projections for the next three to five years.  The projections data will be provided in the same format as the historical data i.e. you will need to provide the Pro forma profit and loss statements, balance sheets and cash flow statements for the next three to five years.

A startup’s financial plan will be different as it will only show the projected data.  The projections should be based on your research about the cost of setting up the business, major capital expenses, cost of operations, expected revenues etc.

Tips for Creating a Financial Plan

• If you don’t know how to crate financial statements you should hire a skilled person to do that for you.
• Do a through research before making assumptions for your projected financials.  Mention the assumptions clearly along with logical reasons within the financial plan so that the reader also knows what your assumptions are and why they are correct.
• The first year projections should be broken down to monthly levels.  The projections for second and third year can be given on a quarterly basis.
• The projections, especially the cash inflow and outflow, should match up your funding requirements.
• It is advisable that you don’t project for more than three years unless you are asked to do so by the potential investor because it will involve too many assumptions.
• Try to include some charts because visual representation highlights the facts in a better way.  This should be done especially if your financials are in good shape.
• You should learn how to read and create financial statements in case you don’t know that because you will needing this skill on a regular basis.

If you are just starting to create a financial plan without any prior experience, it will be good idea to look at a sample financial plan from a related business before moving ahead.

Creating a small business marketing plan is also important because it forces you to think about the existing offerings in the market and how you will differentiate your product or service from them and then how you will convince prospective customers to make a purchase.  While there are some standard approaches to marketing, your small business marketing plan should be unique and developed considering the market conditions, target customers, product offering, budget etc.  Overall, the purpose of a small business marketing plan is to find out if all the elements of the marketing mix have been taken care of in your business.

How to Write a Small Business Marketing Plan

While creating a small business marketing plan, you should include details that answer the following questions:

1. How the industry and market looks like?

The answer to this question should include information about the growth rate of the industry, the competition in the industry, the leading players, top products or services, and the available niches.  All of this information can be easily found on the Internet, trade publications and through industry’s trade associations and you should try to research all these places while creating your small business marketing plan.

2. Who are your potential customers?

This is where you will identify your target customers.  The first segmentation should be based on whether you will be selling to business or consumers.  If you will be selling to consumers, you will need to identify:

• the reasons why they will need your product or service
• what motivates them to buy
• who influences the purchase decision
• how do they make purchases – offline, online, credit, cash etc.
• how often do they use and buy a similar product
• is there any special factor leading to purchase such as an occasion

You should also collect demographics and other personal data such as the gender, age, income, education etc.

If you will be selling to businesses, you will need to find out similar details such as the types of business that will buy your product or service, why will they need it, who are the key decision-makers, who finalizes the purchase etc.

All this information will be useful for choosing the right method for promoting your business to your potential customers.

3. Where are your customers located?

It is important to identify the geographic focus for your business which can be local or city-level, statewide, regional, national or international.  The reason why you need to identify the geographic focus is because each of them requires different advertising and promotion methods and different budgets too that will need to be covered in your small business marketing plan.

4. What are your distribution channels?

This is where you will define how you plan get your product or service to the market.  Will you appoint a sales force, distributors, wholesalers, retailers or you will be directly dealing with the customer through a storefront, website etc.

5. Where and how will you advertise?

In this part of the marketing plan you need to identify where and how you can reach your potential customers.  The places for advertising could be the Internet, shopping malls, highways, television, radio, magazines etc.  The methods of advertising could be banners, billboards, email, videos, podcasts etc.

6. What is your pricing strategy?

Pricing strategy becomes crucial in cases of highly competitive markets.  You should review your competitor’s pricing and then based on your costs, come up with a price that the market will be ready to bear.  Pricing strategy will also be influenced by how you want to position the your business in the market as well.  You can be a low-cost and high-volume player or focus on the higher end of the market that is ready to pay a higher price.

7. What is your sales strategy?

You marketing plan will also need to include your sales strategy.  A great marketing program is a waste until a sale is made.  In this part, you will define how sales will be handled in your business.  Will the marketing and sales be taken care of by the same individual or team?  What is your sales process?  What sales activities will be performed on a day-to-day basis?  Which sales tools do you intend to use?  You will also need to define the terms of sales such as payment and credit policies.

Marketing and sales is the revenue generation engine of a business.  Having a right small business marketing plan will ensure that your business is always in business.

The management and organization section should include your management team’s profile, the organization structure and details about the ownership of business.

Management Team

This part is used to introduce your management team to the reader.  You should begin with brief biographies of the key members of the management team including yourself, the founder.  The details that you should include about each member of the management team are:

• Name
• Position in the organization
• Key Responsibilities
• Education
• Work history
• Special achievements

The idea to present all this information is to sell your management team to the reader so don’t forget to include any important detail.  You should provide accurate information as the investors often checks references.  Also, you should not make generic statements such as Mr. X handled a large business development team or significantly increased the profits of the company that he worked with previously.  While highlighting achievements, make quantifiable statements such as “Mr. A handled a team of 50 business development people spread across three parts of the country” or that his work led to increase in profits by sixty percent.

In case you have an advisory board consisting of notable members be sure to include them here.  Having an advisory board with well known and successful business people goes a long way in establishing the credibility of your business.  It shows that you are not  trying to do everything yourself as well as you recognize that you don’t know everything and will have access to professional help when needed.

Organization Structure

An investor would be interested in knowing your organization structure to assess that you know all the key areas and positions required to make your business a success.  The organization structure should be presented using an organization chart that outlines all the key positions in the organization, who is currently serving at that position and a brief description of each position.  It’s not a problem if you have some key positions vacant in your organization’s structure and you shouldn’t hide that or hesitate in showing that to an investor.  It is not unusual for a startup to have some of the key positions vacant and investors also understand that.  The important part is to recognize that gap and have a plan for filling up that position as quickly as possible.  Also, you should be able to explain who is taking care of the responsibilities of that vacant position currently.

Ownership

Last but not the least, the investors also want to know the ownership details of the business.  In this part, you will need to provide details about the legal structure of your business and ownership distribution.  Include in this part, details like:

• Business type – Incorporation, partnership or sole proprietorship
• Owners – Names of owners and their percentage ownership
• Ownership type – Preferred stock, common stock, general partner, limited partner
• Authorized and outstanding equity or equity equivalents such as options

Having a capable management team and a well thought out organization structure is vital for making a business successful.  It ensures that right people are deployed to right jobs that match their skills, experience and knowledge.

Business Description

The Business Description section will actually be a detailed version of the elevator pitch that you will present in your business plan’s executive summary.  This is where you present to the reader the specifics about the business you’re in and what it does.  You will also explain the need for your business and why do you think your business will be successful.

The answer to the question about the need for your business will be derived from the needs or problems faced by the potential customers which you would have already described in the Business Opportunity section.  This needs to presented along with the key factors that you think will make your business a success.  While writing these factors, try focusing on your business’s competitive advantages which could be a better product/service, brilliant executive team, strong R&D resources etc.

Product and Service Description

In this section you will answer the question “What are you selling?”  You will need to provide a detailed description of the products or services that you will be selling.

By description, we don’t mean that you need to provide an endless list of features of your product.  Just provide a list of key features and focus on the benefits to the customers; for example, if you were selling cars, you would like to emphasize on  the fuel efficiency, the acceleration, driving comfort etc. rather than providing the technical specifications.  Remember, users don’t pay for features, they pay for the benefit or satisfaction that they get from the features present in a product or service.

Apart from the basic description, you should provide details about:

Development Stage: Which stage the product or service is currently in?  Is it just an idea, a prototype or a fully functional offering that is ready to be sold.

Competitive Strengths: Explain how your offering is superior than those of competitors and how it will better satisfy the needs of customers.

Intellectual Property: Are you going to crate any intellectual property such as patents, trademarks, copyrights etc.  This is a key aspect to focus on if you are writing a business plan to raise funds from venture capitalists.  Even if you are not writing the plan for raising funds you should focus on creating some type of intellectual property as it acts as an entry barrier to the competition.

Future Plan: Describe the future plan for development of products and services.  How you will improve the current offering?  Provide details about the research and development capabilities that you have.

Needless to say that the claims that you make about your business, product or service need to be backed with solid data.  You don’t have to include all that data here as that should be a part of the Appendix.

It is said that businesses are more comfortable explaining the features of their products than their business itself.  To check whether you have written a good business, product or service description, make one of your friends, who doesn’t know anything about your business, read the description.  If he/she can understand what business you are in and what are you trying to sell by reading the business, product and service description then you have got it right.

You need to describe the overall business opportunity, its potential, the industry and the competition in the market analysis section while writing a business plan.  You should also include any special factors that affect the market such as government regulations and policies, entry barriers etc.

Business Opportunity

A business opportunity usually arises out of a need for a product or service; however, there have been cases where a product/service was first created and people developed the need later but it happens rarely.  As an entrepreneur the safest way to go is to identify a predominant need and convert that into a business opportunity.  The need can be identified through several methods, for eg: market research, understanding of the situation through experience etc.  In this section, you will present the need of the customer, how and to what extent the need is being met currently and the gaps that you have identified as the business opportunity.

Target Market

This section is used to describe the market that you are aiming to capture.  The items to be presented in this section include the market size, demographics, distinguishing characteristics of the market, special trends that affect the market and the market share that you expect and plan to capture.

Size: The size of the market can be expressed by providing the number of buyers and their annual spending on products or services similar to your offering.  Don’t forget to consider the market growth rate while calculating the market size.

Demographics: Based on the product or service, you will include the demographics that identify your target market.  This may include age range, gender, purchasing power, life-stage, social class etc.  You will also need to include the geographical location of your target market.

Special characteristics: All market segments have some distinguishing characteristics such as purchasing cycle, decision making power etc. that separate them from other segments and, also, influence the buying behavior.  You will need to identify and describe the special characteristics of your target market.

Trends: You will need to identify special trends that govern your target market currently and the ones which can have a major impact in the near future.  An example of this would be automobiles.  Today most cars run on gas; however, in future we may find cars running on solar energy becoming a norm.

Market Share: Here you will describe the market share that you expect to capture supported by a logical explanation for your predictions.

Include all your research and analysis in the appendix and only present the key facts and charts here.

Industry

This section should have a brief description of your industry along with details like the industry size, historical growth rate and projections, and special trends and factors that affect the industry.

Competition

The competitive analysis will need to be presented in this section.  The competitive analysis should include the current competitors, their strengths and weaknesses and the market share they represent.  In rare cases of no direct competition, you will need to identify the future competitive landscape and who all can become the direct competition to your product or service.  It is good to have the future competitive scenario in mind in advance even if you have existing competition.

Regulatory Restrictions and Entry Barriers

Some industries and markets are governed by a set of regulatory restrictions.  You will need to identify all the regulations and policies that affect your business and how the business will operate while complying to regulations and policies.

Apart from the regulations and policies, some markets have entry barriers that are either natural or created by the competition.  You will need to identify the entry barriers for your business which could be high startup cost, patents and trademarks that are related to your business, lack of human resources etc.

You may also want to list down the entry barriers that you will create or exist in the market, if any, that prevent competition from overpowering your business and penetrating in your target market.

If done right, the target market and opportunity analysis will provide you great insight into your market as well as the chances of your success.

The executive summary is usually the last section to be written in a business plan because one can only summarize the information that is already laid out clearly in other sections of the plan.  While it is last to be written, the importance of the executive summary should not be undermined as it is the first section to be read by the people.  Based on the quality of the executive summary the person may decide to read the business plan further or throw it in the bin.  Another important point to consider while writing an executive summary is the length of the summary.  It should be written like a summary i.e. brief and crisp yet explanatory.

Writing Executive Summary – The Traditional Approach

Traditionally, an executive summary is meant to describe your business to the reader.  It should consist of the mission statement, the description of business, key business details such as the number of employees and financial highlights.  Let’s look into the contents of the executive summary in detail.

1. Mission Statement

The mission statement should briefly explain the reason why your business exists.  A mission statement helps business owners and employees make critical decisions in accordance to the overall direction of business and also helps outsiders such as customers, vendors and media relate with your business.

A mission statement does not have a specific format and it could be anything like few words, a couple of sentences a paragraph or even an image.  The key is to keep it focused, making it memorable and clear enough for anyone to understand the purpose of your business.

2. Business Description

In this section you will describe what your business does or will do.  You should start this section with a one-sentence description of your business, also called the elevator pitch.  It is said that if you can’t explain your business in one sentence to anyone then there is something wrong with your overall business concept.

After the elevator pitch, you can include details such as the description of products or services that your business offers.  The idea is to briefly introduce the problems that the target market faces and how your product or service helps solve that problem.  You should also briefly mention the competitive landscape and how your product or service is different from that of the competitor.

3. Financial or Business Highlights

If your business has got some achievements that you would really like to share you should put them in this section of the executive summary.  As a new business you may not have significant financials to share.  In that case, you can try and include highlights such as user growth or some unique achievement such as a testimonial from a big customer.

Apart from the above three sections some other details that can be included in the summary are business details such as the location of the business, legal structure i.e. whether the business is an incorporation, sole proprietorship or partnership, name of the founders and key employees.

If you are writing the business plan for raising capital then also include the purpose of the document when you write the executive summary.

How to Write Executive Summary – The Modern Approach

Businesses today need to sell themselves to everyone, the customer, employees, shareholder, and the investors.  Most often the business plans are written to attract investments from venture capitalists and other investors.  In this case, your business plan’s executive summary need to sell your business concept to the investor rather than simply describing it.  The executive summary should be compelling enough, without being overhyped, to make the right first impression.  If you choose to write your executive summary in the new way, you should include:

1. The Grand Opening Statement

These one or two sentences need to be the most impressive and should really convince people that you are not just another startup.  Use this statement to describe the uniqueness of your solution that addresses the big problem.  This statement will also be your elevator pitch that you will use to describe your business to anyone.

2. The Problem

Describe the problem that the customer currently faces and intensity of the problem.  The purpose is to establish the fact that there is a big problem out there that you intend to solve.

3. Your Solution

Share your offering in this section and how it solves the problem.  Clearly define the offering – whether it is a product, service or a combination of both.

4. Opportunity

Use this section to define the opportunity that you have in hand.  Explain the target market, current market size, growth rate, the growth drivers etc.  While defining the market size don’t overestimate and be specific about your niche; for example, if you are making a to-do list application that works on iPhone, don’t claim that your opportunity is the entire mobile market.

5. Competition and Differentiation

While you may feel that you are the first mover in a particular space, chances are that you will have competitors.  Direct or indirect, existing or expected, there will be competition and it is in your own benefit to recognize and define the competition and your competitive advantage.  You may not have an absolutely new business idea but you can always differentiate yourself in terms of service, operating method, price, quality etc.  Be very specific about the competitive advantage of your product or service.

6. Business Model

Share your revenue generation methods in this section and who will pay for your product or service.  Will you charge your customers a one-time fee, monthly subscription fee or annual license renewal fee?  What is your pricing strategy?  Are you going to compete on margin or volume?

7. Financials

If you are an existing business then use this section to describe your financial achievements so far and future projections.  New businesses with no financial history should simply provide projections for the three years in terms of revenue and profits.

8. The Team

An idea is nothing without execution and it is the business team that executes the idea.  Most investors are interested in knowing the people behind the business and their capabilities.  Describe the key team members, their experience and work history, role in the current business etc. in this section.

9. The Need

This is where you mention what you are looking from the investor i.e. the amount of funding.

Whatever approach you choose to write, it is essential to know how to write the executive summary in the most effective manner to be able to convince the reader about your business concept.

How to Find Small Business Opportunities and Ideas

The process of finding small business ideas involves an assessment of your interests, skills, business types etc.

Personal Assessment

The first step in finding great small business ideas is to evaluate yourself, your preferences and your personality.  You need to ask yourself:

• Which subject you enjoyed most in your school and college?
• What are your interests and hobbies?
• What would you enjoy doing even without getting paid for it?
• What are your top three business skills (analysis, sales, accounting, marketing, hiring, training, project management etc.)?
• What are your top three personal skills (creativity, leadership, counseling, problem solving, listening etc.)?
• What jobs have you enjoyed doing the most during your career and why?
• What jobs have you enjoyed doing the least during your career and why?

The purpose of these questions is to find out your strengths and weaknesses, your passion and interests etc.  If you are willing to write books, for example, without even being paid for them, it shows you are passionate about writing books.  Starting and running a business requires the entrepreneur to be highly passionate about the overall concept of the business.  The skills assessment would help you find out what jobs you are good at and shows that you will be able to assume those responsibilities in your business.  The skills that are not your strengths can be acquired through trainings and courses.  Finding out about jobs that you liked (and disliked) doing most in your career is important because chances are you will still like doing those as part of your business and will be able to do them well.  This will also help you select the right category of business for yourself.

Business Types

Most types of small business opportunities and ideas can be divided into four major categories: Manufacturing, Wholesale, Retail and Services.  Understanding of these categories is essential because each one has their own working styles, capital requirements, entry barriers etc.

Manufacturing – The mother of all businesses.  Manufacturing businesses are both capital and labor intensive businesses.  To run a manufacturing unit, you will need machinery and equipment, human resources, inventory etc. which require capital investments.  The upside of starting a manufacturing unit is that it’s a high reward business and, if successful, can grow very quickly.

Wholesale – A wholesale business is the intermediary between manufacturing units and retailers.  The wholesale business, in spite of lot of manufacturers dealing directly with retailers and even consumers, is an active and important element in the distribution of products.  The wholesalers buy large quantities of products at discounted prices from manufacturers and sell them to retailers at a marked up price.  Since a wholesale business has to buy in large quantities and also need to maintain a big inventory, the capital requirement is very high.  The upside of a wholesale business with a product that is in high demand can bring significant profits due to economies of scale.

Retail – Everyone knows retail very well because we deal with retailers very often, almost on a daily basis.  A retail business has low capital requirements as it does not require huge inventory and the business operates mostly on cash (no receivables).  A retail business can also be run on the Internet without needing a physical storefront.

Services – One of easiest and least expensive business types to start.  A services business does not require huge inventory (pool of skilled workers is the inventory) and the cost of equipments is also very minimal.  The upside of a services business is that it is the safest to start but one can’t expect exponential growth unless there is a revolution, for example the unprecedented growth in the IT industry.

Generating Small Business Ideas

A thorough personal assessment and understanding of business types should most likely give you several small business opportunities and ideas; for eg: if you are a passionate about photography then you can become a freelance photographer or if sales is one of your strength and you love golf then you can start selling golf equipments and gear.

In case you are still not able to find the small business idea for yourself then you can use any idea generation technique.  We suggest using SCAMPER as it is provides a structured and multi-dimensional way of generating ideas about any topic.  To put SCAMPER to generate ideas for a new product or service, you will:

S – Find or create a Substitute for an existing product or service

C – Combine with an existing product or service

A – Find out how people will be able to Adapt to it easily

M – How it can be Modified to create a different offering

P – How it can be Put To Other Uses

E – Eliminate dissatisfaction, waste etc.

R – Reverse or Rearrange to create a new offering

Evaluating Small Business Opportunities and Ideas

If you follow the above steps you will have more than a couple of small business opportunities and ideas to select from.  The next step is to evaluate those ideas to ensure that the business you are planning to open is right one to start and suitable for you.

The demand and supply – Determine the demand for the product or service that you plan to offer.  If the demand is high and there is a gap in supply then it makes a right business opportunity.

The competition – Study the competition closely to find out the reasons for their success, operating procedures, strengths and weaknesses.  Find out the gaps in their processes and what you can do differently and better.  If there is something that they are not offering or you can do something that will be valued more by the customers then go for it.

The Industry – Find out if the industry is overcrowded with big and strongly placed brands.  If it is then it is probably not the industry that you should be in unless you really have a game changer in your hand.

The Business Dynamics – Some businesses and industries change very rapidly.  Find out your comfort level with the dynamics of the industry that you are planning to be in.  You may not want to start selling mobile phones, for example, if you are looking for a slow paced industry.

Specialization – Are you a specialist in the business that you are planning to open.  There is a definite advantage in being a specialist and called an expert in any field.  An expert is valued more by customers and is given preference over others, for example Starbucks specializes in coffee and Google specializes in search.

Risk – Determine the inherent risks in the business and compare it with your risk taking capacity.  If you have low risk taking capacity then go for services or retail businesses.

Affordability – The decision on starting a small business should finally be based on whether you can afford to start and run that business.  Of course you can raise funds but that also has a cost that is to be paid.  If you are looking for inexpensive business to start then think of providing services rather than starting a manufacturing unit.

If you follow the above steps we are sure that you will be able to find the most suitable small business opportunities and ideas for yourself.