Startups will inevitably face opportunities and challenges that can either stimulate growth and enhance revenue or stall expansion and compromise assets. A well-developed business plan will help you identify your startup goals and implement an effective strategy to attain them.
Why is a Business Plan Necessary?
Founders that forego the business planning stage when charting a course for their startup often learn that skipping this important step proves foolish over time. A business plan is a living document that serves as a blueprint to help you build your company. In addition to being a tactical plan to assist you in achieving your business objectives, a thoughtful plan can help you anticipate forthcoming challenges and identify opportunities for growth.
A business plan is a must-have if you are seeking external investments to help fund your startup operations. Nine times out of ten, prospective investors will ignore you if you do not have a business plan or if they do not like the plan you have developed. Although your plan should pique the interest of prospective investors, you should avoid tailoring it solely for fundraising purposes.
Steer clear of incomprehensible jargon and clichés that don’t provide sufficient detail about your company’s goals and objectives.
There are no hard and fast rules regarding the level of detail you should include in your business plan; however, investor interest is generally ignited when an entrepreneur prepares a concrete strategy that presents attractive potential returns to prospective investors. Avoid inflating details that make your endeavor appear miraculous. Experienced investors won’t believe the hype.
Sometimes the enthusiasm felt during the initial formation of your startup dulls when you are faced with the day-to-day tasks associated with running a business. In such instances, your business plan can be a source of renewed inspiration. A well-prepared plan retains your core mission and objectives even as your day-to-day strategy evolves. Course corrections may impact your approach, but if your plan is solid, your central vision will remain intact.
Develop Your Plan
Although tailoring your business plan for one particular purpose should be avoided, it is important to identify the scope of your audience. In addition to being a blueprint for everyday operations, a comprehensive business plan should include information of interest to lenders, investors, executives and, in keeping with the current trend toward greater transparency, customers. Typical components of a business plan include all of the following:
- Executive summary describing your business and its products and/or services
- Information about the company’s ownership structure
- Details about the management team, board members and staff (and staffing needs)
- Information about the intellectual property owned by the company
- Highlights of operational milestones
- Financial statements
- List of compelling reasons why the company is likely to succeed
- Planned strategy for development, growth and exit
In addition to the sections outlined above, a comprehensive business plan generally includes these components:
- analyses of market trends, including market size and growth rate;
- industry cost structure;
- competitive advantages;
- your current and prospective customer base; and
- an outline of your operational and marketing plans.
Get Ready for Business
While drafting your business plan, there are several things you can do simultaneously to prepare to launch your startup.
- Select a name for your business. This includes verifying that you can legally use the name you have chosen.
- Register the business name and the domain name even if you are not ready to launch your website.
- Choose a location for your business.
- Prepare and file incorporation documents and obtain the necessary business licenses.
- Open a business bank account.
- Establish a good accounting system, regardless of whether you plan to self-manage accounting processes or use an accountant.
- Register with the USPTO to file the necessary applications to protect your IP assets.
- Identify the insurance needs for your business, including healthcare and D&O coverage.
- If needed, apply for a sales tax number.
- If you have employees, obtain an Employer Identification Number. The U.S. Department of Labor offers extensive information to help you develop a clear understanding of labor laws and issues, such as workers’ compensation.
- Launch your marketing campaign, which should include establishing a web presence.
Depending on your state of incorporation, the tasks associated with launching your startup may vary. It is a good idea to check with local authorities, such as the Secretary of State, and consult with legal counsel to identify the necessary steps to get started.