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2 Business Plans

Below are links to the articles and assignments for the two class sessions in Week 2. 

The economy is hard to see. There is the local economy, the national economy and the world economy. When the economy is good, there are plenty of jobs. Wages go up as employers compete for a limited supply of workers. As wages go up, it is easier for families to pay the rent for their home or apartment. People are more confident and make more purchases which helps businesses succeed and hire even more workers. This is called an upward spiral or positive feedback loop.

However, when the economy is bad, the opposite happens. Businesses sell fewer products and have less money to pay workers. The business owner has to fire workers or reduce their hours or reduce their pay. Workers then have less money to buy goods and pay the rent. They shop less which puts more pressure on business owners to further reduce their number of employees. This is called a downward spiral or a negative feedback loop. If it goes on long enough, it is called a Recession or Depression.

The fact that employee wages and hours rise when the economy is good is an example of the Law of Supply and Demand. This law states that as the supply of a product (such as workers) goes down, the Price or Pay for those workers will go up. If there are too many workers in a given field, then the supply will go up and the pay will go down.

We can also look at the Demand for products or services. As the demand for products goes up, then the price for the product will also go up.

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Therefore one key to having a successful business is to choose a product or service with a high demand or lots of buyers but also a low supply or few competitors. Another key to a successful business is to make sure your business generates more in sales and income that it spends in expenses and costs.

The Household Budget
Before we look at a business budget, let’s first look at a family budget. Just like businesses, families need to make sure that the money coming in each month is greater than the money being spent each month.

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The household budget starts with the initial bank balance. It is important to keep some savings in the bank each month to allow for unexpected emergencies such as the car breaking down. To make things simple, we will use a family of three with an initial savings of $1,000 and a total monthly income, after taxes of $3,000.

In this lesson, we will review how to write your business plan including choosing a business field, researching existing businesses in that field, choosing your business name and then writing your actual business plan.

Choose a Business Field
In choosing a business field, it is wise to consider the Law of Supply and Demand we discussed in the last session. The best way to insure a successful business is to pick a field with a big demand – in other words a lot of customers – but a limited supply. Put another way, choose a problem, product or service that is not currently being addressed by many other businesses and then develop a plan to meet that need.

Another important factor in creating a successful business is to choose a field that you are personally interested in and a field that you have already spent a lot of time researching. Starting your own successful business will require a lot of hours of your time. To follow it through, you will need to have a personal interest in the field you are entering.

Finally write down more than one idea for a business to give you other options if your first idea falls through or your business plan reveals that there is no way for your first idea to make a profit. Write down how will your business will meet an unfulfilled need and what products or services your business will provide.

Research existing businesses in that field
Next do an online or community search of other businesses like the one you want to start. A key question to answer as you research other businesses is what could you offer to customers that would be better than what customers already get from other existing businesses. Why should customers choose your business? What will be unique about your business? Write down the benefits of your business. You may want to include these in the name of your business. And you certainly should include these reasons in the first couple of paragraphs on the Home page of your business website. Also find out what the costs and expenses of other businesses might be. Are they successful? Could you use some of the ideas other businesses use to promote themselves as ideas you could use to promote your new business?

Choose your business name.
One of the most important decisions in starting a new business is choosing a unique, simple and memorable business name. Begin with a list of options. See if friends and family have ideas. Then do an internet search on each of your ideas to see if these business names, also called Domain Names, have already been taken. If a business is already actively using a Domain Name, such as Worlds Best Lemonade, then choose a different Domain Name that is a little or a lot different such as Worlds Best Lemonade Stand or Worlds Greatest Lemonade or Lots of Lemonade or Wonderful Lemonade. It costs about $10 per year to own a Domain Name and you do not need a real domain name for our course.

But if you are serious about staring a business and choosing a Domain Name that is not already taken. Occasionally, you will find that a Domain Name you want is taken but is not being used – there is no website associated with the domain. This is called “sitting on a domain” with the hope of selling it to someone else. Such Domain Names can be used by switching to a different extension such as dot net or dot org or dot us instead of dot com. Remember, if there is no website, then it is likely that there is not an active business. One needs an active business in order to protect a Domain Name.