Business Plan For Small Service Firms PDF

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Business Plan forSmall Service FirmsManagement and Planning SeriesU. S. Small Business AdministrationApril 2009Helping Small Business Start, Grow and Succeed

Business Plan forSmall Service FirmsManagement and Planning SeriesMP -11The material in this publication may not be reproduced or transmitted in any form or by any means -- electronic,mechanical, photocopying or other -- without prior written permission of the U.S. Small BusinessAdministration. How to Write a Business Plan, Copyright 1990, Linda Pinson and Jerry Jinnett. All rightsreserved.All of SBA's programs and services are extended to the public on a nondiscriminatory basisOffice of Entrepreneurship EducationApril 2009U.S. Small Business Administration2


INTRODUCTIONA business plan can provide the owner-manager or prospective owner-manager of a small service firm with apathway to profit. This publication is designed to help an owner-manager develop a business plan.To profit in business, you need to consider the following questions, among others: What business am I in? Whatservices do I provide? Where is my market? Who will buy the services? Who is my competition? What is mysales strategy? What merchandising methods will I use? How much money is needed to operate my firm? Howwill I get the work done? What management controls are needed? How can they be carried out? When should Irevise my plan? Where can I go for help?No one can answer such questions for you. As the owner-manager you must answer them as you draw up yourbusiness plan. This publication is a combination of text and work spaces to record the information you gather indeveloping your business plan.A Note on Using This PublicationIt takes time, energy and patience to draw up a satisfactory business plan. Use this publication to get your ideasand the supporting facts down on paper. Above all, make needed changes on these pages as your plan unfolds.Bear in mind that anything you leave out of the picture will create an additional drain on your money when itcrops up later. If you leave out or ignore enough items, your business is headed for disaster.Keep in mind, too, that your final goal is to put your plan into action. More will be said about this near the endof this publication.What's in This for Me?You may be thinking, why should I spend my time drawing up a business plan? What's in it for me? If you'venever drawn up a plan before, you are right in wanting to hear about the possible benefits before you do yourwork.A business plan offers at least five benefits. You may find others as you make and use the plan. The first, andmost important, benefit is that a plan gives you a path to follow. A plan with goals and action steps allows youto guide your business through turbulent economic seas and into harbors of your choice. The alternative isdrifting into any old port in a storm.Second, a plan makes it easy to let your banker in on the action. Reading or hearing the details of your plan willfurnish a lender with real insight into your situation.Third, a plan can be a communications tool when you need to orient sales personnel, suppliers and others toyour operations and goals.Fourth, a plan can help you develop as a manager. It can give you practice in thinking about competitiveconditions, promotional opportunities and situations that seem advantageous to your business. Such practiceover a period of time can help increase an owner-manager's ability to make adjustments.Fifth, a sound plan tells you what to do and how to do it to achieve the goals you have set for your business.U.S. Small Business Administration4

Why Am I in Business?Many enterprising Americans are drawn into starting their own business by the possibilities of making moneyand being their own boss. But the long hours, hard work and responsibilities of being the boss quickly dispelany preconceived glamour.Profit is the reward for satisfying consumer needs. But it must be earned. Sometimes a new business might needtwo years before it shows a profit.What then are the other reasons for having your own business? For some, satisfaction comes from serving theircommunity. They take pride in serving their neighbors and giving them quality work that they can stand behind.For others, their business offers them a chance to contribute to their employees' financial security.There are as many rewards and reasons for being in business as there are business owners. Why are you inbusiness?What Business Am I In?In making your business plan, the first question to consider is, what business am I really in? At the first readingthis question may seem silly. If there is one thing I know, you say to yourself, it is what business I'm in. Hold onand think. Some owner-managers have gone broke and others have wasted their savings because they did notdefine their businesses in detail. Consider this example. Joe Riley had a small suburban radio and televisionstore. He thought of his business as a retail store, although he also serviced and repaired anything he sold. Ashis suburb grew, appliance stores emerged and cut heavily into his sales. However, there was an increased callfor quality repair work.When Mr. Riley reconsidered his situation, he decided that he was in the repair business. As a result, heprofitably built up his repair business and contracted with one of the appliance stores to perform service andrepairs.Decide what business you are in and write your answer in the following spaces. To help you decide, think of theanswers to questions such as, what parts and materials must you keep on hand? What services do you offer?What services do people ask for that you do not offer? What is it you are trying to do better, more of ordifferently from your competitors?U.S. Small Business Administration5

MARKETINGWhen you have decided what business you're in, you have made your first marketing decision. Now you areready for other important considerations.Successful marketing starts with the owner-manager. You have to know your service and the needs of yourcustomers.The narrative and work blocks that follow are designed to help you work out a marketing plan for your firm.The blocks are divided into three sections: (1) determining sales potential, (2) attracting customers and (3)selling to customers.Determining Sales PotentialIn the service business, your sales potential will depend on the area you serve. How many customers in this areawill need your services? Will your customers be industrial or commercial clients, consumers or all of these?When picking a site for your business, consider the nature of your service. If you pick up and deliver, you willwant a site where the travel time will be low. If customers must come to your place of business, the site must beconveniently located and easy to find.You must pick the site that offers the best possibilities of being profitable. Consider the following questions: What is the population and its growth potential? What is the income, age and occupation of the population? Are there a number of competitive services in and around your proposed location? Are there local ordinances and zoning regulations that would apply to your business? What type of trading takes place in the area (commercial, industrial, residential or seasonal)?For additional help in choosing an area, you might try the local chamber of commerce and the manufacturer anddistributor of any equipment and supplies you will be using.You will want to consider the next list of questions in picking the specific site for your business. Will customers come to your place of business? How much space do you need? Will you want to expand later on? Do you require any special features in lighting, heating or ventilation?U.S. Small Business Administration6

Is parking available? Is public transportation available? Is the location conducive to drop-in customers? Will you pick up and deliver? Will travel time be excessive? Will you prorate travel time to service calls? Would a location close to an expressway or main artery cut down on travel time? If you choose a remote location, will savings in rent offset the inconvenience? If you choose a remote location, will customers be able to locate your business readily? Will the supply of labor be adequate and the necessary skills available? What are the zoning regulations of the area? Will there be adequate fire and police protection? Will crime insurance be needed and available at a reasonable rate?I plan to locate in becauseAlso consider these questions:Is the area in which you plan to locate supported by a strong economic base? For example are nearby industriesworking full time? Only part time? Did any industries go out of business in the past several months? Are newindustries scheduled to open in the next several months?Write your opinion of the area's economic base and your reasons for this opinion here:U.S. Small Business Administration7

Will you build? What are the terms of the loan or mortgage?Will you rent? What are the terms of the lease?What is the competition in the area you have picked?How many nearby firms handle your same service?Does the area appear to be saturated?How many of these firms look prosperous?Do they have any apparent advantages over you?How many look as though they're barely getting by?How many similar services went out of business in this area last year?Can you find out why they failed?How many new services opened up in the last year?How much do your competitors charge for your same service?Which firm or firms in the area will be your biggest competition?List the reasons for your opinions here.U.S. Small Business Administration8

Attracting CustomersWhen you have a location in mind you should work through another aspect of marketing. How will you attractcustomers to your business? How will you pull customers away from your competition?Many small service firms find competitive advantages in how they attract customers. The ideas they develop areas good as and often better than those that large companies develop with hired brains. The work blocks thatfollow are designed to help you think about image pricing, customer service policies and advertising.ImageWhether you like it or not your service business is going to have an image. The way people think of your firmwill be influenced by the way you conduct your business. If people come to your place of business for yourservice the cleanliness of the floors, the manner in which customers are treated and the quality of your work willhelp form your image. If you take your service to the customer the conduct of your employees will influenceyour image. Pleasant, prompt and courteous service before and after the sale, will make satisfied customers.You can control your image. Whatever image you seek to develop it should be focused enough to promote inyour advertising. For example service with a smile is an often-used image.Write what image you want customers to have of your business.PricingIn setting prices for your service consider these four main elements: (1) materials and supplies (2) labor andoperating expenses (3) planned profit and (4) competition. Further in this publication you will have theopportunity to figure out the specifics of materials, supplies, labor and operating expenses. From there you maywant the assistance of your accountant in developing a price structure that will be fair both to the customer andto you. This means that you must not only cover all expenses but also allow enough margin to make a profit.One other thing to consider. Will you offer credit? Most businesses use a credit card system. If you use a creditcard system what will it cost you? Can you add to your prices to absorb this cost?Some trade associations have a schedule for service charges. Check with the trade association for your line ofbusiness. Their figures will make a good measuring stick to ensure that your prices are competitive.And, of course, your prices must be competitive. You've already found out your competitors' prices. Keep thesein mind when you are working with your accountant. If you will not be able to make an adequate return now isthe time to find it out.U.S. Small Business Administration9

Customer Service PoliciesCustomers expect certain services or conveniences such as parking. These services may be free to the customerbut not to you. If you do provide parking you either pay for your own lot or share the cost of a lot with otherbusinesses. Since these conveniences will be an expense plan for them.Will you provide a warranty or guarantee on your work? A typical service warranty is 30 days on parts and 90days on labor; this means that you will correct any problems arising within a specified time frame followingperformance of a service at no charge. The time frame can vary depending on the kind of service you provide. Awarranty tells customers you want them to be satisfied with the work of your company.List the services that your competitors provide customers.Now, list the services that you will provide your customers.ServiceEstimated cost AdvertisingConsider advertising last after you have determined your image, price range and customer services. Only thenare you ready to tell prospective customers why they should use your services.When advertising dollars are limited it is vital that your advertising be on target. Before you can consider howmuch money you can afford for advertising take time to determine your advertising goals. The work blanks thatfollow should help.The strong points about my service business areMy service business is different from my competition in the following ways:U.S. Small Business Administration10

My advertising should tell prospective customers the following facts about my business and services:Determine the target audience for your advertising. The audience will be those people who are most likely touse your services. Describe your customers in terms of age sex occupation and whatever else is necessarydepending on the nature of your business. This is your customer profile. For example an automobile repairbusiness may have a customer profile of automobile owners 18 years of age and older. Anyone over 18 whoowns a car is part of the target audience.The customer profile for my business isNow you are ready to think about the form and costs of your advertising. You are looking for the most effectivemeans to tell your story to those most likely to use your service. Ask the local media (newspapers, radio andtelevision and direct mail printers) for information about the services and results they offer.How you spend advertising money is your decision, but don't fall

When picking a site for your business, consider the nature of your service. If you pick up and deliver, you will want a site where the travel time will be low. If customers must come to your place of business, the site must be conveniently located and easy to find. You must pick the site that offers the best possibilities of being profitable.