Start With a Great Idea & Demonstrate How to Make It Happen
Would you take a long road trip without activating your GPS? Without it, you could eventually get where you wanted to go, but it's likely you'd make some wrong turns, spend extra money for gas and rack up more hours behind the wheel than enjoying your destination. When your destination is business ownership, you likewise need a roadmap to guide you around the curves and help you avoid the bumps. Quite simply, a business plan is a document that describes what you plan to do and how you plan to do it. It clarifies your goals and strategies. It helps you make the best decisions for the future of your business and your family.
Why Do You Need a Business Plan?
You may have a vision for the opening of your business, but you need to detail all the steps necessary to get there. If you're hoping to borrow money from a financial institution, a lender will want to see that you have a business plan in place. Some of the questions to address as you prepare to write your plan:
- What is the purpose of the business? What products and/or services will you offer?
- Will you buy or rent space, or will you operate out of space you already have?
- Do you need to buy inventory or equipment?
- Are any permits or licenses required?
- Will you operate the business on your own, or will you hire and train employees?
- What is the source of financing for your business? How much of your own money, before borrowing, will you use?
Components of a Business Plan
Although a corporate business plan may be well over 100 pages long, yours will be much shorter for the start of a small business. Here are the seven sections you need to include:
- Executive Summary: A description of the company's mission, an introduction to ownership/management, brief details of the products and services to be offered, a short profile of potential customers, summary of competitors, financial forecast for the first few years in business and, if applicable, start-up financing requirements.
- Business/Industry Overview: A description of the industry overall and your place in it. What do you have to offer that is unique, improved or lower cost than your competitors?
- Market Analysis and the Competition: An assessment of the demand for your products/services in the target market. Are there potentially enough customers to make your business viable? What will you do to stand out among similar enterprises?
- Sales and Marketing Plan: A description of your advertising and promotional strategies, pricing, sales and distribution plan and, if applicable, customers' post-purchase support. How will you attract and cater to customers? How much will you charge them for goods or services?
- Ownership and Management Plan: An explanation of the legal structure (such as sole proprietorship or limited liability corporation) of your business, along with details about ownership, management and staffing.
- Operating Plan: A description of the physical requirements of your business, from the physical space you'll occupy to material needs such as equipment, supplies and inventory.
- Financial Plan: A collection of documents, including cash flow projections, income statements and a balance sheet. When using projected numbers in starting a new business, it's always better to underestimate income and overestimate expenses.
- (Optional) Appendices and Exhibits: Supporting information, as necessary. This section might include resumes of business owners and key personnel, detailed market research, references, photos or drawings.
Keep it simple when writing a business plan. Use straightforward language, such as "now" instead of "at this point in time." Avoid buzzwords, industry jargon or acronyms; don't assume your readers will understand them. Format your document in a word processing program, using one simple font (such as Arial or Times New Roman) no smaller than 12 point. Use bullet points for lists so information can be grasped more quickly and easily.
Starting Your Own Business
Any business first starts with an idea. No matter how great the idea is, though, you'll need to put in the time and effort to bring it to reality. Although it's not quite true that 50 percent of all new businesses fail in the first year, the U.S. Bureau of Labor Statistics reports that about half of business startups don't make it to their fifth anniversary, and only about one-third make it to their tenth. It takes confidence to start a business, and entrepreneurs can sometimes be _over_confident. They can also be underfunded, which is the number one cause of new business failure.
Say you do have a good idea. What next?
- Write your business plan to demonstrate that you have a clear purpose and strategies to implement it.
- Assess your finances realistically, deciding how much of your own money to risk and what, if anything, you should borrow.
- Determine your legal business structure: sole proprietorship, partnership, cooperative or corporation. Research the advantages and disadvantages of each before deciding what's right for now and for the future.
- Register with the Internal Revenue Service and state and local governments, as required. An Employer Identification Number (EIN) is required for tax purposes and can be obtained free online.
- Consider an insurance policy, such as professional liability insurance for a service-based business, unemployment insurance if you'll have employees or general liability insurance.
- Hire employees, unless you'll be in business by yourself.
- Choose your vendors and business partners. The list might include an accountant, an attorney, employment agency and various providers of equipment and supplies. The type of business will dictate your needs.
- Build your brand and attract customers. Create a logo and a social media presence.
- Grow your business. Join groups in your area that afford opportunities to network with other small business owners. Continue to learn about the products/services you offer and the needs of your customers.
The U.S. Small Business Administration (SBA) is a non-partisan government agency that exists to help entrepreneurs launch and build their businesses. The SBA's website has information and forms to get you started. District offices are located throughout the country that offer free counseling to prospective business owners.
Denise Dayton is a a freelance writer who specializes in business, education and technology. She has written for eHow.com, Library Journal, The Searcher, Bureau of Education and Research, and corporate clients.