How to examine an idea with a start-up business plan

The first thing you should do when starting a business is put together a basic start-up business plan to investigate the viability of the idea. This way, you don’t waste time preparing a full business plan without any indication of whether the idea will succeed.

A start-up business plan should do the following.

Identify your potential customers

Answer these questions:

• Why should this business exist?
• Who will be its customers, and how will it benefit them?
• How will your product or service solve your customer’s problems or satisfy their needs?

Outline your keys to success

Name three or four critical factors that will be essential to your new business’s survival. Be tough about it and don’t underestimate the importance of critical elements. For example, a restaurant will need to provide quality, value for money, service, ambience, cleanliness and consistency.

READ: Before you start a business in Kenya – part one

Determine your points of difference

If you aim to provide a product or service that no one else is providing, that’s great. As long as you have established there is a demand for it.

However, if there are already similar products or services in the market place, you’ll need to have something that sets yours apart. This must be something your product or service does that is different or better than your competitors’ products or services. In other words, what makes your product or service unique?

Analyse the market

Do a simple market analysis. Estimate how many potential customers the business will have. Define the traits that will make somebody a potential customer. You should divide customers with similar traits into different target markets. Where do those customers now purchase, if at all? Are there enough potential customers among all your target markets?

Examine ease of entry

How easy is it going to be to set up your business and how easy will it be for competitors to follow you? Answer the following questions.

• How much will it cost you to set up in business?
• How well developed is the market?
• How many competitors will you have?
• Are they direct or indirect competitors?
• How difficult will it be for others to follow you into the market?

Consider intellectual property (IP)

Think about what your business is and does, and what parts of it might need protection.

READ: Before you start a business in Kenya – Is your business idea viable? – Part two

A simple break-even analysis

How many units of sales will you need to cover costs? Are you being realistic? Add up the costs you’ll have for rent, overheads, wages, advertising… then figure out how much money you’ll make for each unit you sell, after its specific costs, and calculate how many units you need to break even.

For example, if your shoe store’s regular running costs are 60,000 shillings per month and you make 200 on average (after the cost of the shoes) on every pair of shoes, then you need to sell 300 pairs of shoes in a month to break even.

Now think about it. Do you really have a potential business? If you do, then you need a real business plan. If you don’t, then you’ve saved yourself the time and trouble.