A business plan consists of a narrative and several financial worksheets. The narrative template is the body of the business plan. It should address hundreds of questions regarding the company purpose and description, products and services, marketing strategy, operational plan, management and organization, personal financial expenses, startup expenses and capitalization, and a high level financial plan. The business plan will also consist of an Executive Summary, which should be done last.
The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.
It typically takes several weeks to complete a good plan, depending largely on the type of business and time you have to devote to the business planning. Most of that time is spent in research and re-thinking your ideas and assumptions.
Creating your business plan should also start with a consultation with the holy trinity of business consultants:
the business attorney, CPA, and financial planner.
The value of the process is in the research and systematic self-analysis. So make time to do the job properly. Those who do never regret the effort. And finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data. This is something your investors will want to see.
Here, we discuss a few elements of a well drafted Business Plan. Take the time to process this information and see how you can incorporate it into your business planning solutions.
Determine Your Risks
As a startup if you’re going to have any conversation about profit then you better have twice the conversation about risks and specifically the things that can otherwise impact your bottom line. Risks might be the competition, the existing market conditions, anticipated market conditions, political issues which may impact your market or your specific business etc. etc.
Determine Your Start Up Costs
Aside from costs of the formation of the business (from a filing perspective) which are briefly discussed above you should also consider the following costs as they are applicable to your business: (a) legal fees for documenting business governance, (b) costs associated with trademark filings (discussed in a separate article), (c) commercial leases, (d) costs associated with securing and building out a desired space for your new business venture, (c) costs associated with funding of the Company and transactional costs of funding, (d) costs of licensing and permit requirement, (e) costs associated with employees or outside consultants, (f) costs of commercial and personal insurance, and (e) the costs of creating a comprehensive contract management process (discussed below).
A great guide for estimating your startup costs can be found on the SBA website.
Determine the Funding and Capitalization of Your Business
The business plan will address the funding requirements of your Company in order to get the Company off the ground and running. Funding can come from various sources: (a) personal assets (b) loans or (c) investors.
Choosing a loan vs. investor oriented approach will, like anything else, depend on your personal and long term business planning goals. The draw back of investors is that unless they opt to be passive they may require a say in the management of your company which may or may not be desirable depending on your goals. Having a business attorney and CPA to discuss and analyze your options is a highly recommended first step.
Determine Your Commercial Space Requirements
Securing a space for your business, like anything else we’ve discussed thus far, entails research and planning. Finding the right space for your business means researching zoning issues, marketing considerations, costs of leasing, costs of building out the space, etc.
Some of the basics of commercial leasing are discussed in a separate post however suffice it to say having an attorney review a commercial lease is important for two reasons:
(1) negotiating the terms of the transaction to ensure they are commercially and legally reasonable, and
(2) providing you the business owner with the assurance or detailed explanation of the liability you are about to incur (and probably personally guaranty to some extent).
Terms such as Rent, Additional Rent, Use, Real Estate Taxes, Default and Good Guy Guaranty, will be issues that your attorney should take the time to address with you in as much detail necessary so that you are comfortable with the transaction and your obligations as well as rights under the lease.
Set Short Term and Long Term Goals
First, set realistic goals.
Second, map out the steps to each goal.
Three, recognize that goals, like the nature of your business, will change on a year to year basis and that it is important to re-evaluate your goals and processes periodically.
Fourth, determine if your past strategies have been successful or are even applicable to the changing needs of the business.
Document Your Business Relationships
Your business has multiple levels of relationships, each of which are integral for the survival of the business. When these relationships fail the business is subject to tremendous risk. To put it another way, when you have not clearly set forth the parameters, terms and conditions of each of these relationships your business profitability is at risk.
Establish Contract Management Protocol
Contract Management Protocol is the process of dealing with every new client or customer. It is the process you adhere to when engaging new clients or customers and it is the standard for whether you consider accepting a new client or customer. It is also the process of determining when it is time to cut ties with a customer and when to take (or threaten) legal action in enforcing an obligation. Contract Management Protocol is discussed in greater detail in a separate post.