You've thought it through, you've considered the finances, and you've decided that you're ready to move forward with the next step of starting your own small business. What's next? Time to create a plan.
Drafting a Business Plan
According to the U.S. Small Business Administration, one of the first steps to planning a business is determining who your target market is and why they would want to buy from you. A thorough business plan will answer the following rudimentary questions, plus much more:
- What purpose does my business serve?
- Who is my competition?
- What is my strategy to capitalize on existing market opportunity?
- What are my operating procedures?
- What types of capital equipment will I need?
- How much profit/loss should I expect?
The goal of a business plan is not simply to identify needs and projections, but also establish a market niche. Finding a niche is important for capitalizing on your competitors' oversight and identifying opportunities for growth within your own business.
Executive Summary and Company Description
Think of the executive summary as a bird's eye view of your company. Talk about what your company is all about and why it will succeed. Be sure to include your mission statement, what product or service you'll provide, and basic information about your company's leadership, staff, and location. If you plan to ask for financing, include high-level growth plans and financial information.
For the company description, go into more detail about the problems that your business solves and be specific. List out customers or other businesses that your company will serve. This is important—don't forget to explain the competitive advantages (like having an expert on your team) that will make you successful, so feel free to toot your own horn and talk up your business.
Organization and Management
How will your company be structured? Who will run it? There are more than a few options to set up your business, such as a partnership, limited liability company (LLC), or corporation. Consider using a chart to easily identify who is in charge of whom and how each person's experience will help your company succeed.
Market Analysis and Service or Product Line
It's imperative to understand your target market (who you're selling to) and the future of your industry. How will it grow? How might it change? Research should also show you what competitors are doing and what they're good and bad at. Answer questions such as how you can do what your competitors do even better and why. Don't forget to explain how your product or service will benefit customers and what the product lifecycle looks like, too. Share your plans for patents or copyrights if applicable. If you're doing research and development, share those activities in detail.
Marketing and Sales
Marketing is ever-evolving, and there is no one-size-fits-all plan. Your marketing should change and grow as your business does. What you want to do here is talk about how you will find and keep customers and describe how a sale will actually happen. Refer to this later when you make financial projections, so include the finer details to show a complete picture of your marketing and sales strategies.
Funding Request and Financial Projections
If you're looking for funding, clearly explain how much you'll need over the next five years and what the money will be used for. In exchange for funding, do you want debt, or will you give equity in the company? On what terms and for how long? When describing what the funds will be used for, be specific. Are you buying equipment or materials, paying salaries? How long will it take for your business to become profitable? Always include your future plans regarding finances and discuss paying off debt or other plans.
When it comes to financial projections, show that your business is or will be stable. If you're already established, include all your financial documents, such as balance sheets and cash flow statements going back three to five years. If you have assets that can be used as loan collateral, list them here as well.
Last but not least, include your financial projections for the next five years. Forecasted income statements, cash flow, and balance sheets are all important here. If this will be your first year in business, be specific and include quarterly or even monthly projections, clearly explain them, and match them back to your funding request. Visual elements such as graphs and charts are helpful, so use them wisely.
Help with Crafting Your Business Plan
There are countless business resources available for budding entrepreneurs like you. A good place to start is the U.S. Small Business Administration's website. The SBA's site provides excellent resources at no cost so you can get an idea of the next steps and get your questions answered.
WaFd Bank is Here for You
We're in the business of bringing simplicity to yours. If you're looking for business accounts and straightforward solutions to help you grow your business, our friendly business bankers are available to answer questions and offer help and resources to get you pointed in the right direction so you can reach opening day and beyond.