In order to be successful, every small business owner must create a detailed plan outlining the development of the business, contingencies for handling changes or unforeseen obstacles and future goals. This plan will not only be essential to obtain start-up funds, but will also help you keep track of your business goals and allow you to shift directions seamlessly if necessary. The process of creating a small business plan differs depending on the specifics of your startup. Business plans can range in size from a few pages to hundreds.
Coming Up with a Small Business Plan
A small business plan should contain the following:
- An executive summary clearly stating what your goals are for the business. This is a half-page outline for your whole plan and should touch on each part – especially who you are, what you’ve done and, of course, how much capital you need to get started.
- A business description highlighting the industry as a whole, how your business fits in, and any potential changes to the industry that could impact your business.
- A detailed market analysis that is based on careful study of the market and defines your target market. The goal of this section is to let investors know that you’re knowledgeable about the market you’re entering.
- Organization and Management, a section including your businesses organizational structure and details about the ownership of your company.
- A product or service line plan that details the production curve of the product you are offering or a typical service cycle for the service you will provide, including a production budget.
- A structured marketing and sales plan that defines marketing and sales strategies and sets goals. Four marketing strategies should be defined including a market penetration strategy, a growth strategy, a channels of distribution strategy and a communications strategy. Also, include a two-part sales strategy: A sales force strategy and your small businesses sales initiatives.
- Funding Request, a section in your small business plan about your request for funds. This section is only necessary for those seeking outside funding.
- A collection of financial projections measuring your company’s financial health, best restricted to a cash flow statement, income statement, balance sheet and projections for the future.
There are several dos and don’ts that can help small business owners navigate the startup planning process. Use these tips as a guide to stay focused and draft a plan that will lead your small business to success.
The “Dos” of a Small Business Plan:
- Do take your time with your small business plan. Rushing through the process just to have something will almost guarantee that you miss important details that could hurt you down the road.
- Do follow the outline above, providing enough information that your business plan can completely explain your business to a funding source.
- Do be as accurate as possible with numbers. Take the time to calculate exact costs and to consider every potential cost involved in running your company.
- Do name your number – that is, clearly state the amount of money you are seeking through loans or other funding methods.
- Do use relevant charts and graphics to simplify the presentation of complex analysis.
- Do restate your executive summary in the conclusion to bring your plan together.
- Do revisit your plan regularly to take changes into account.
The “Don’ts” When Creating a Small Business Plan:
- Don’t present a handwritten business plan. If you work better by hand for rough drafts that’s fine, but your final product must be clean, polished, and professional. Handwriting does not convey a serious approach to your business.
- Don’t force your business plan to conform to page limits. Write as much as you need, whether that means ten pages or one hundred and ten.
- Don’t ignore your competition. Underestimating competitors or the potential for competition can leave you unprepared to address challenges in the marketplace and can mean disaster for your company.
- Don’t present financial projections without explanation – describe just how you developed your figures so any errors can be addressed.
- Don’t flood your small business plan with overspecialized details. Your business plan must be easy for an outsider to understand, and most will not have the necessary industry expertise to read a super-technical plan.
- Don’t use filler
- Don’t put your plan in a drawer once it’s complete. Consistently monitor your performance against your business plan so you fully understand what works and what doesn’t, and more importantly why.
Most critically, do get your business plan into the hands of potential funding sources. Small business factoring is an excellent source of cash flow to start a new business and meet large start-up expenses without waiting for your initial customers to pay. The factoring process for small business is fast, and it is easy to get started.
Factor Finders’ small business factoring program is available to companies in a wide variety of industries. Contact us to learn more and receive a free quote today!