How To Write A Startup Business Plan
Why Do I Need A Business Plan?
Why do you need to write a business plan? There are a number of
reasons. Writing a plan dramatically increases your chances of
success as an entrepreneur.
Here are just a few reasons why you would want to write a
business plan.
1. Evaluating initial startup costs. 2. Determining what it will
take to make a profit. 3. Analyzing your competition and it's
success and failures (which you can capitalize on) 4. Well
defined rolls of all people involved in the company. 5.
Investigating your market and developing a strategy. 6.
Anticipating problems before they occur. 7. Defining a clear
goal and exit strategy for your business. 8. Convincing
investors to fund your business
Some may scoff at all of the parts of a business plan, but
remember that you are undertaking this endeavor to make money,
not to just produce a product or service. Most businesses fail
because they are hit by unforeseen expenses -- or situations --
that they should have anticipated ahead of times.
To give yourself the best chance of success, do your homework
ahead of time and you'll be way ahead of most people.
Plan Your Work, Work Your Plan
A business plan is not a document set in stone and you will
probably change it in the future as your business develops. When
you are stuck on an issue refer back to your business plan and
remember what your initial goals were and whether the situation
has changed significantly enough that the plan needs to be
reworked.
Planning your work is when you write your plan, but you can't
just stop there. You must work the plan and stick to it as you
move forward in order to meet your exit strategy or other goals
for the company.
Step 1: Defining Your Product Or Service
The first step to writing your business plan is defining exactly
what your product or service is. This is what you will approach
a potential customer with.
How would you explain your product or service to a potential
client?
What would you tell them about it?
How would your product or service relate to other businesses?
Describing your product or service should fit within 1 paragraph
with supporting paragraphs underneath it. Most people, when
dealing with something innovative or something that is identical
to a competitor, try to cop out of this and say "it's just too
complex for my product to be described". That's hogwash.
Every product or service can be defined. If your product or
service is so innovative that it can't be defined then the
chance of it succeeding is very low.
Here are a few examples.
* Google was simply "a better search engine that works" * Apple
was simply "a computer that can fit on a desk" * Microsoft was
"an operating system that can be mass distributed" * Amazon.com
was "a mail order bookstore with an online front end"
Describing your product is not a hard thing to do. Implementing
a strategy to sell, distribute or market your product in the
long run has the most impact on whether your business will
succeed.
Step 2: Who Are Your Customers?
Defining your target market may be a little difficult if you
think your product can be used by anyone, but it can be done.
Simply putting "everyone on Earth" is not a practical target
market.
Whether your product or service can be used by everyone is not
the key, it's who can afford and needs your product.
Is it small businesses? Does it fit the consumer market that
cooks a lot? Is it Internet users who are looking for dolls?
Defining your exact target market is key to setting up a proper
marketing strategy. Without knowing who your potential customers
are you will be casting your line into a vast ocean rather than
a stocked pond.
Another part of this is determining if your target market can
afford your product and will they purchase it from you.
If your product can only be used by boys age 14-18 and the price
of your product is $1000 your market will probably be very small.
This is all part of the plan, don't be discouraged if you find
that upon doing research your product or service doesn't make
sense. It's better to evaluate things now and scrap the whole
thing than to accept money from investors and finding out later
that your business doesn't stand a chance.
Step 3: Market Strategy
Who is your competition? How will you reach your target customer
or client? These are all questions that need to be defined.
Find two or three competitors and evaluate them. Where are they
successful? Where is their main revenue coming from? What things
have they tried and failed? What things do they lack that you
will provide?
Analyzing the competitive landscape is an important part of
determining if you can succeed. You may even realize other areas
that your product or service needs to focus on to have a chance
of succeeding.
How are you going to reach your customer? Will it be through
catalogs? Advertising in the local paper? Word of Mouth? Direct
sales?
Investigate the costs of implementing a strategy of reaching
your customer and client base.
If you are selling a product how much will it cost to get your
products on shelves or to set up a e-commerce website?
What are the costs involved to place advertisements?
Simply having a product or service and not having people even
knowing that it exists is a certain road to failure from the
start.
Step 4: Financing And Capital
What are your initial expenses for starting your business?
You need to analyze all costs for beginning your business and
how much capital you will need to keep the business running. If
there is payroll involved you will need to factor in payroll
taxes as well as salaries. You need to know how much in legal
costs you will incur incorporating and for lawyer and accounting
services.
If you are providing a product what is the cost of having it
produced and an inventory for it?
Letterheads, logo's, business equipment, software and business
cards all fit in this category.
There is no hard and fast rule for how much capital you will
initially need in terms of months in advance. Most businesses
underestimate how much initial expenses and ongoing monthly
expenses they have.
How will you fulfill orders? If via mail you will need to factor
in packaging and shipping expenses.
If you are stocking a store with your item you will need to
factor in delivery charges and expenses.
Once you have determined both your ongoing monthly expenses and
initial expenses then you can evaluate how much initial capital
you will need and where you intend to get it.
Will your financing come in the form of angel investors, venture
capital, self financed or friends and family? Securing this
financing could have expenses you have not counted on, be sure
to include these expenses as well.
Step 5: Operations
You need to define the operations of your business and how your
product or service will reach a customer from development all
the way to end user. If you are providing a product you will
need to define the whole flow.
Here's a few questions for a product based company.
How will the product be produced?
How will it be stored?
How will it be delivered?
How will customers place an order?
How will an order be processed?
How will a customer get a receipt?
Where will fulfillment take place?
How will money change hands?
When will the customer receive their product?
How will customer service be handled?
For a service based company most of the above questions have
their equivalent.
These questions need to be answered. It shows that you have
thought ahead on how your business will operate.
Step 6: Putting It All Together
Once you have analyzed your product, your customers, your
competition, market strategy and financing it's time to put it
all together in a document known as a business plan.
There is no single format for writing a business plan. The best
way to write a business plan is to study business plans. You can
find some business plans on the web to study.
Here is a basic overview of the things you should provide in a
business plan.
1. Cover Sheet 2. Statement of Purpose I. Part 1: Business
Analysis a. Description of the Business b. Marketing Strategy c.
Competitive Landscape d. Operating Flow e. Management and
Personnel f. Exit Strategy g.Insurance Information II. Part 2:
Financial Information a. Equipment, Supply List and Assets b.
Balance Sheet c. Break-even Analysis d. Pro-forma Projections
Including i. 3 year summary ii. Detailed projection by month of
the first year iii.Detailed quarterly projects for year 2 and 3
iv.Assumptions or how you reached your projections e. Pro-forma
Cash Flow III. Part 3: Supporting Documentation a. Tax returns
of the principals involved in the business for the last 3 years
b. Franchise contracts, proposed leases and purchase agreements
c. Any licenses or legal documents the business needs d. Resumes
of all the principals involved in the business e. Letters of
intent from suppliers and other services
Remember that not all of these things need to be included right
off the bat. If you are not going to have proposed leases at
this time while you are starting your plan, it can go on your
task list of things to do.
The most important part is getting started on your business plan
so that you can spot the things you need to get done to complete
it.
Most investors are not going to just hand you money without a
pretty solid business plan though, so if you're not too good at
doing the financials you better get to work on learning how to
project pro-forma cash flow and projections.
Once you have your business plan you are well on your way to
creating a successful startup!