Whether you’re starting a new company, seeking additional financing for an existing one, or analyzing a new market, a business plan is a valuable tool. Think of it as your blueprint for success. Not only will it clarify your business vision and goals, but it will also force you to gain a thorough understanding of how resources (financial and human) will be used to carry out that vision and goals.
Before you begin preparing your business plan, take the time to carefully evaluate your business and personal goals as this may give you valuable insight into your specific goals and what you want to accomplish. Think about the reasons why you are starting a new business; maybe you’re ready to be your own boss, or you want financial independence. Whatever the reason it is important to determine the “why.”
Next, you need to figure out what business is “right for you.” Chances are you already have a specific business in mind but if not you might want to think about your business in terms of what technical skills and experience you have, whether you have any marketable hobbies or interests, what competition you might have, how you might market your products or services, and how much time you have to run a successful business (it may take more time than you think).
Finally, you’ll need to figure out how you want to get started. Most people choose one of three options: starting a business from scratch, purchasing an existing business, or operating a franchise. Each has pros and cons, and only you can decide which business fits.
The final step before developing your plan is developing a pre-business checklist which might include:
- Business legal structure
- Accounting or bookkeeping system
- Insurance coverage
- Equipment or supplies
- Financing (if any)
- Business location
- Business name
Based on your initial answers to the items listed above, your next step is to formulate a focused, well-researched business plan that outlines your business mission and goals, product or services to be provided, presents a market analysis, and specifies what your business goals are and how it intends to achieve those goals. Last, but not least, it should include a formal financial plan.
Preparing an Effective Business Plan
Now, let’s take a look at the components of an effective business plan. Keep in mind that this is a general guideline, and any plan you prepare should be adapted to your specific business with the help of a financial professional.
Introduction and Mission Statement
In the introductory section of your business plan, you should make sure you write a detailed description of your business and its goals, as well as ownership. You can also list skills and experience that you or your business partners bring to the business. And finally, include a discussion of what advantages you and your business have over your competition.
Products, Services, and Markets
In this section, you will need to describe the location and size of your business, as well as your products and/or services. You should identify your target market and customer demand for your product or service and develop a marketing plan is. You should also discuss why your product or service is unique and what type of pricing strategy you will be using.
This section is where you should discuss the financial aspects of your business–and where the advice of a financial professional is vital. The following financial aspects of your business should be discussed in detail:
- Source and amount of initial equity capital.
- Develop a monthly operating budget for the first year.
- Develop an expected return on investment (ROI) and a monthly cash flow for the first year.
- Provide projected income statements and balance sheets for a two-year period.
- Discuss your break-even point.
- Explain your personal balance sheet and method of compensation.
- Discuss who will maintain your accounting records and how they will be kept.
- Provide “what if” statements that address alternative approaches to any problem that may develop.
The Business Operations section generally includes an explanation of how the business will be managed on a day-to-day basis and discuss hiring and personnel procedures (HR), insurance and lease or rent agreements, and any other pertinent issues that could affect your business operations. In this section, you should also discuss any equipment necessary to produce your product or services and how the product or service will be produced and delivered.
The concluding statement should summarize your business goals and objectives and express your commitment to the success of your business.
If you have any questions about business plans or need assistance creating one, help is just a phone call away!