Starting a company is a bold step in any economy, yet necessary if you are looking to cast away the shackles of a simple employee and try your hand on the wide seas of entrepreneurship. It is a common strategy to develop a business plan, which will both help you run the company in the future and convince any potential investors that their money would be in the right hands with you. There are several important topics to cover when thinking about creating a business plan.
First things first
It is true that to register a company today has never been easier. Almost everything can be done online, which is a great advantage to some pre-internet days. However, some things have not changed – and one of them is having a clear objective of what you want to achieve by starting a company.
Your mission statement will provide your business plan with your reason for going into business, what kind of business you are going for (if you are going for a retailer, whether it is physical or an online one, for example) and remember to briefly touch on the vision and the future as well. Keep it short and sweet, a few paragraphs will do.
Analyze your desired market
Many companies start without a clear image of who they have as competition, i.e. who is doing the job they want to do already, possibly at a good enough level to warrant no new companies on the market. This is where your market research skills are needed. It is not a buzzword that just gets thrown around, but a real necessity.
Your target market needs to be narrowed down, segmented into several categories according to some of the most common denominators, such as demographic or geographic ones. Combine that with the gender, income and the average age of your potential customers and you will be able to target your products or services more directly. This will help with designing a market strategy for your business plan as well.
If the market is already filled with companies doing what you wanted to do, that does not bode well for you. This is the main reason why the majority of startups fail. However, the second major reason is running out of cash. Your business plan is supposed to prevent this by planning for it in advance.
This is very hard, especially if you do not have a lot of experience. Still, you have to list all the necessary expenses, your overheads, equipment, legal and security expenses, banking, advertising and everything you can think of. The golden rule is: when you aren’t sure your amounts are enough – go higher. This way you will reduce the potential for failure.
Hierarchy of power
Even if it is just a small number of people in your startup, your business plan needs to cover some rapid expansion and this includes the organizational structure. Again, choices might confuse you, but there are a few points of view you can take. Probably the most important one is whether your company is going to have more than 50 employees at the beginning, or less.
Because 50 is that magical number, below it, the informal structure can function, where the CEO practically knows everybody and can manage pretty much everyone. When you go above that number, there is the necessity to implement a somewhat rigid and more formal structure, with the owner/president on top and various managers, officers and departments below him. Again, decide which one you think is better for your startup and lay it out in the business plan.
Format your plan accordingly
You will eventually have to sit down and write the damn thing. There are a lot of places online where you can find a format guide, but let us quickly lay out a few don’ts. Your business plan is not your doctor’s dissertation, it should not be a 100-pager. Keep it short and keep it to the point. Focus on details and be thorough. Give each section at least a page or two, so it is not too short. There is no room for any errors in spelling or informal language.
Don’t joke around in your business plan, because you are trying to raise capital from people and they might not be too happy to part with it for something they deem less than serious. Have someone (preferably several people) you trust read it and give you honest feedback – you need opinions on what to fix because it is most likely something will need improvement.
Take the opposite approach
Finally, perhaps you are one of those people who feel like they do not need a business plan. Which is perfectly valid, and if you don’t want to spend your time on a startup business plan, you still have to make sure that you cover the bases. It might be better to spend your time practicing your pitch presentation skills, where you will explain what your company is about clearly and briefly.
Do your market research beforehand and get to know your competition and focus on building a prototype that does what you want it to. Make sure you have the ins and outs of your financial projections and you might not even need a business plan as such.