starting your own company, crafting a detailed financial document that outlines your strategy and long-term goals may not be at the top of your priority list, but it should be. Without a sound written plan that outlines your concept, structure and financial projections, it can be difficult to secure essential funding.” data-reactid=”11″>When you’re contemplating starting your own company, crafting a detailed financial document that outlines your strategy and long-term goals may not be at the top of your priority list, but it should be. Without a sound written plan that outlines your concept, structure and financial projections, it can be difficult to secure essential funding.
startup off the ground.” data-reactid=”12″>But unless you’ve been to business school, you may have never learned how to write a business plan. With that in mind, here are the basic steps for writing a business plan, along with key resources, detailed instructions and tips for getting your startup off the ground.
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secure a loan or attract key investors to get your business started, a detailed business plan is crucial. A written plan provides an overview of your business concept, structure and potential opportunities or risks for investors. The more well-laid-out your business plan is, the better your odds of attracting a lender or investor. Even if you don’t intend to borrow money or pitch investors, crafting a business plan can help you fully understand the challenges ahead.” data-reactid=”15″>If you need to secure a loan or attract key investors to get your business started, a detailed business plan is crucial. A written plan provides an overview of your business concept, structure and potential opportunities or risks for investors. The more well-laid-out your business plan is, the better your odds of attracting a lender or investor. Even if you don’t intend to borrow money or pitch investors, crafting a business plan can help you fully understand the challenges ahead.
“You’re writing (a business plan) for lenders and investors to show that they can trust you with their funds,” says Rob Stephens, founder of CFO Perspective, a business consultancy in Spokane Valley, Washington.
But even if you don’t plan on finding lenders, you should still write a business plan, Stephens says. “The first investor you need to convince is yourself,” Stephens says. “I had many doubts about leaving a good job to start my company. I looked at my business plan financial projection 20 times in the six months before starting my company to assure myself to take the big leap.”
While business plans can differ in format and structure, experts agree there are some key elements to include.
Here’s what to include and how to write a business plan, step by step:
— Executive summary.
— Company description.
— Objective statement or business goals.
— A market analysis.
— Management and operational strategy.
— A financial analysis.
— Financial projections.
— Appendix.
This section sums up everything about your business. Mostly, it should explain how the business will make money. You can also include information such as a mission statement, an overview of your industry — and how your business fits into it — and a description of your service or product.
LLC or S Corp, you’ll want to include that information as well as the registered name of the business, along with where you’ll be located and your overarching mission for the company.” data-reactid=”32″>While the executive summary gives the big picture on why your company is needed, this is where you can describe your business and drill down further into specifics on your company’s core products or services. If you’ve registered it as an LLC or S Corp, you’ll want to include that information as well as the registered name of the business, along with where you’ll be located and your overarching mission for the company.
business strategy. You may want to include an industry analysis, explaining who your competition will be and how you will market your product or service. You’ll also want to explain how your company will spend any investment it receives, explaining how the revenue will help the business develop, grow and reach its goals.” data-reactid=”34″>In this section, you should address your business strategy. You may want to include an industry analysis, explaining who your competition will be and how you will market your product or service. You’ll also want to explain how your company will spend any investment it receives, explaining how the revenue will help the business develop, grow and reach its goals.
This is where you define your target demographic and how your business will attract it. If you have hired a market research firm to conduct a market analysis for your business, you can include that information. You’ll also want to show lenders and investors that you really understand who your business is servicing.
Think of this as an outline of the nuts and bolts of how your business will run. The more information you put down, the more you’ll demonstrate to key stakeholders that you’ve really thought how your business will operate. You’ll want to consider key questions like: Will you have inventory? If so, you’ll also want to take into account how much you will likely carry, whether or not you will manufacture a product and what the structure of manufacturing a product will look like.
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You’ll want to highlight pricing and profit margins and explain how your company will make money. In this section, consider including any details that will be helpful to point out the financial strength of your company, like a balance sheet with your company’s assets and liabilities.
Estimate how much your company is likely to earn in its first year or two and provide that information to potential lenders and investors. If you have an estimate for the rate of return for investors, you’ll definitely want to highlight this here. This is also an ideal section to indicate any risk factors you haven’t spelled out.
You can consider this section as optional, but if you have something like a resume that you’d like to include or paperwork, like permits you’ve already applied for, you could include that here.
Bruce Hogan, the New York City-based founder of SoftwarePundit, a technology research firm, says that you really want to study the different components of your business plan and why they are important. “You need to understand your product, target customers, sales and marketing strategy, financials, competitive landscape and the team you’ll need to build. If you don’t understand one of these areas, invest additional time mastering it,” Hogan advises.
too caught up in trying to create the perfect business plan, he says. “At a certain point, your time is better spent building your business rather than perfecting your plan,” he says.” data-reactid=”52″>But at the same time, Hogan advises, don’t get too caught up in trying to create the perfect business plan, he says. “At a certain point, your time is better spent building your business rather than perfecting your plan,” he says.
“I recommend sharing your business plan with trusted friends and advisors early on in the process,” says Bobby Reed, CEO of Capitol Tech Solutions, an internet marketing service in Sacramento, California. “By getting feedback, you can strengthen the plan.”
You also should consider reaching out to business experts for assistance in developing your plan, suggests Lin Grensing-Pophal, who is based out of Chippewa Falls, Wisconsin, and is the co-author of the book, “Writing a Convincing Business Plan.” She is also the author of many other business books, including, “The Complete Idiot’s Guide to Strategic Planning.”
“Local universities and technical colleges often offer this type of assistance through instructors or student groups,” she says. “In addition, most communities have organizations like SCORE that can provide small businesses with access to retired business experts with expertise in finance and other areas.”
The U.S. Small Business Administration is also a great resource. The website SBA.gov offers information about writing a business plan. What’s more, there are 68 district office around the U.S., and the SBA works with over 300 SCORE chapters, 980 Small Business Development Centers, over 100 Women’s Business Centers and 20 Veterans Business Outreach Centers across the country, according to Andrea Roebker, regional communications director of the Great Lakes region for the U.S. Small Business Administration.
“Your actual financial results won’t match your business plan. Investors understand that,” Stephens says. Investors are mostly concerned that “you have the right people leading a company with a good business model to earn significant income,” Stephens says. “Clearly point out these items and back them up with a believable financial projection.”
Grensing-Pophal echoes similar sentiments. “Don’t think that your plan needs to be right. There’s no such thing,” she says. “Instead, your plan should be an educated, and fact-based, description of what you believe you can accomplish based on the best information available to you at the time the plan is created.”
business plan, many experts say. It suggests a lack of attention to detail. You also want to be clear and concise and avoid lending confusion to the reader.” data-reactid=”62″>Overhyping the financial projections is probably the biggest mistake. If your numbers are unrealistic, investors will lose confidence in you. But another significant mistake is having grammatical errors and spelling mistakes riddled throughout the business plan, many experts say. It suggests a lack of attention to detail. You also want to be clear and concise and avoid lending confusion to the reader.
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Ideally, you’ll continue to update your business plan regularly. “Don’t be afraid to change, modify or entirely toss out your plan,” Grensing-Pophal says. “Things change. Markets change. Competitors change. Assumptions change. When these things happen, your plan should change, too.”
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