Amazing Kids! Magazine

Planning a Business

By Fatima Yousuf, Money Smarts Editor and Contributing Writer

 

Many of us have read about young entrepreneurs and their achievements but often are clueless as to how we ourselves can get our own businesses started. However, becoming an entrepreneur is not as intimidating as it may seem once you write out a business plan and plan out your operations. A business plan is a document that outlines a business’s goals and strategies for achieving them. Business plans are essential not only for organizing operations but also for attracting sponsors who would invest in your business.

Before you write your business plan, you need to know what you plan to offer to consumers. Will you be offering products, such as food or toys, or will you be offering a service, such as tutoring or lawn-mowing? Are there other businesses that offer a similar product, and if so, how can you attract customers to buy your product/service over someone else’s? Once you are able to answer these questions, you can start your business plan! While there is no concrete template to write your business plan, you must follow these five steps in order to make sure your plan is comprehensive:

Step One: Write down a paragraph that briefly describes your business’s service/product and goals. As a business owner, you must be able to describe your business easily to others, especially to potential sponsors.

Step Two: Write down any partners that will work with you on the business. Be sure to write down how profits will be split and any specific responsibilities each partner will have.

Step Three: Make a list of the supplies needed to get started and the costs of each item. The total cost is also known as the start-up cost. If you do not have enough money saved to cover the start-up cost, you may need to talk to sponsors about receiving investments.

Step Four: Write a list of ongoing expenses and supplies for your business. These are costs needed to keep the business running. The difference between start-up costs and ongoing expenses is that startup costs are typically one-time whereas ongoing expenses must be paid regularly. For example, if you are running a lemonade business, a start-up cost would be buying a table to set up the stand, and an ongoing cost would be paying for sugar to make lemonade.

Step Five: Determine what you will charge consumers for your product or service. In order to make a profit, you must charge consumers more than what the product/service costs. For example, if it costs $1.00 to make a cup of lemonade, then you must charge more than $1.00 to make a profit. To calculate profits, simply subtract the cost of making a product and other costs from the amount charged.

For example, say you have $100, and you make 100 cups of lemonade. This means that it cost you $1 to make each cup of lemonade. If you price each cup of lemonade at $2, you will have a net gain of $200. $100 goes towards making more lemonade to sell, and you get to keep the other $100 dollars as a profit.

To optimize your profit, you will need to evaluate the market and the demand. If there is a smaller demand or lots of competition for a product/service, you may need to set your price lower. On the other hand, if there is little competition or high demand, you can set your price higher.

Here is an example of a fairly simple business plan, so you get an idea of how to set yours up.


FATIMA’S COOKIES

BUSINESS PLAN (SAMPLE)

Fatima’s Cookies is a small business that will sell cookies at Amazing Kids! Elementary School. We noticed that many students often complain about how their parents give them healthy food and they rarely get to indulge in sweets. To change this, Fatima’s Cookies will sell cookies to fulfill their need.

The administration has agreed to allow Fatima’s Cookies to sell on campus for $50 a month. Fatima’s Cookies will offer chocolate chip cookies at lunch and after school on Thursdays and Fridays although we may include other varieties as the business expands.

Fatima and her sister, Sarah, will be partners in this business, and each will receive 50 percent of all profits. Both partners will be sharing all responsibilities. We will make 300 cookies a month to sell and may make more each month as the business grows.

Start-Up Costs

Table $50
Table Cloth $10
Sign that says “Fatima’s Cookies” $20
TOTAL $80


Ongoing Costs per Month (for 300 cookies)

Administration Fees $50
Sugar $50
Butter $60
Vanilla $20
Eggs $30
Flour $50
Baking Soda $20
Salt $20
TOTAL $300


Seed Money

In order to cover start-up costs and initial ongoing costs, Fatima’s Cookies will need $380. We have already covered these costs as shown below.

Fatima’s Money Saved $100
Sarah’s Money Saved $100
Sponsorship from Parents $180
TOTAL $380


Price Charged

When factoring in administration costs, the cost of each cookie is $1.00. Fatima’s Cookies will charge $2.00 a cookie. This means that we will have a net gain of $200 a month. Of this, $100 will go towards making more cookies, and the other $100 in profits will be split evenly between Fatima and Sarah.


Now you have an idea of how to set up your business plan and organize your business! Many kids have already started their own business and made money! With strong dedication and a smart business plan, any kid can learn entrepreneurial skills and make some money!

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