So why should you go to the trouble of a business plan? Why not just move forward with your idea and take things as they come? If you are starting a new business, the first thing to keep in mind is that it takes more than a good idea or a good product to make a successful business.
The first thing you need to do is validate if your business is feasible. Will you make money at it? How long will it take before you start making money? Do you have enough funds to start your business or will you need outside funding? How will you take your product/service to market? The list of questions goes on and on.
Let's just focus on the feasibility of a new business. You should have in mind some number as far as revenue or units you expect to sell in the first year. You will need to compare that number to the market as a whole. You can get a lot of information on the internet. Just google your product/service and similar products/services to see what marketing analysis already exists. It makes sense to invest in a good market analysis report on your industry. From that you need to figure out what your total market is and compare that to your sales projection. Is your sales projection reasonable?
For instance, you plan to sell 10,000 units in the first year, 15,000 units in year 2 and 20,000 units in year 3. Your market analysis tells you the entire market for your product (or similar products) is 7,500 per year. Obviously, the market doesn't currently exist for the product you intend to sell. What if the market was 100,000 units per year? You may say, "Great, let's go!", but you then need to ask yourself if you think you can gain a 10% share of the market in year one. That's pretty aggressive even in a market that isn't competitive and if you are in a competitive market, then it may be next to impossible. This doesn't mean you need to give up on your idea, it just means that you need to figure out how to penetrate the market and based on that, you need to come up with a realistic (tough, but not impossible) annual sales goal. That along with price and cost information will start to give you an idea of how much money your business will generate and when.
It's all about turning the unexpected into the expected! So, go forth and research your market!
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