When you’re planning on devoting a large portion of your life to a business, you shouldn’t be skimpy on the details. It may sound cool to try and keep everything in your head in the beginning, but eventually you’re going to have to put them down in writing somewhere if you’re going to remember it all.
Your new business can survive without a business plan in theory, but it stands a much better chance of beating the odds of failure if you put one together early in the process. In your plan, you should define what your short term goals are and how you intend on reaching them. Then, you should outline the same for your long term goals.
Here are some things that you should include in your business plan to increase your chance of success.
What Type Of Business Do You Have?
The type of business that you have is important, particularly for potential investors. Some investors will only invest in certain types of businesses. One that will invest in retail may not invest in construction. One that invests in brick and mortar stores may not invest in e-commerce websites.
Is your company an LLC, a corporation, a sole proprietorship, etc..? You’ll need to know this and what the tax consequences are for each one according to the location you’ll be starting up in.
Do you have a physical location or is your business solely an online presence? Describe where the business is run adequately if it’s a physical location, including square footage, how much the expenses are, etc.
What Are You Selling?
Are you selling physical products, information, or are you selling services?
You’ll also have to list out whether your product has different prices for different variations of it or if you have many different products in the same store for different prices.
How Are You Going To Market?
Who is your customer? You need to be able to describe who you believe your customers will be. Keep in mind that after you get your business up and running that you may discover that who you thought would be your best customers aren’t and it’s a completely different demographic.
That’s okay and it happens. Just be sure you adjust the information in your business plan to reflect that and adjust your marketing strategy to accommodate them.
Do you know how you’re going to get your first sales of your products or services? Will it be with paid advertising, SEO, word of mouth? Or through some other method?
You need to be able to articulate just how you intend on reaching your target audience.
What Are Your Costs Going To Be?
How much it’s going to cost you to get started is a big deal, because having an inadequate amount of financing to start with is a bad thing that’s difficult to overcome.
You need to have a good idea of what the following things are going to cost you:
- Office & Other Supplies
- Consultant fees
- Website (you really should have a website, it’s 2020)
- Any other type of expense you may incur to get started
Who Is Your Competition?
Do you know who the competitors are for what you’re offering? Be able to define these things:
- Who your competitors are
- What their common factors are
- What sets you apart from all of them
- What differences between you and them will you use to market your business?
What Do Your Finances Look Like?
You’ll need several documents put together that outline what your current personal finances are, what the startup’s finances are, assets, liabilities, etc.
- A list of everything you’ll need to purchase to get running, from tangible items to licenses, etc
- What assets, liabilities, and how much equity you have in the beginning
- A cash flow statement that gives a month to month assessment of sales and expenses
- P&L, otherwise known as a “pro forma income statement” for the first 3 years it will operate, which projects income and expenses, including tax liabilities
- A break-even analysis, which illustrates when you expect to break even
- Where you get your funding and how you will use it
Have Your Personal Finances Ready, Too
If you don’t think your personal finances will be scrutinized when you go to a lender for a loan to fund your business startup, think again. They’re going to want to see some good financial proof on your personal end before they’ll consider lending to you. You’ll need:
- Your previous 3 years of income tax returns
- A great credit score and a positive credit history
- A personal financial statement
- Your recently updated CV or resume
How Is Your Business Going To Be Managed?
You’ll need to have a good idea of what type of people you’re going to need to manage your company and those who will the the primary decision makers.
You’ll also have to describe who your ideal employees are going to be.
Create Your Executive Summary
Your executive summary should be a basic summary of the above information condensed into a format that a lender can read quickly and instantly decide whether to lend to you or not. It goes at the very beginning of the business plan, so it’s going to be the first thing any potential lender will see.
Your executive summary should include:
Your company’s info such as name, when you plan to be open, whether it’s an LLC, sole proprietorship, etc
- A summary of what you’re selling
- What your business’s mission is
- Who your target market is
- What your investment needs are
- How much you’ve personally invested into the business
- When you think the business will break even