The Most Important Thing to Do Before Starting a Business in 2018
January 3, 2018
January 3, 2018
After losing weight and quitting smoking, one of the most popular New Yearâ€™s resolutions is to finally launch the new business you have long dreamed of owning. With a strong economy and competition in the small business lending marketplace in 2018, the current atmosphere is ripe for people who have thought about pursuing the American Dream of business ownership.
Those who are unable to find friends and family to lend money and donâ€™t have enough saved to self-fund their business pursuits, will need to secure financing from an outside source. During 2017, approval rates for small business financing hit post-recession highs at big banks, according to the latest Biz2Credit Small Business Lending Index (November 2017 figures). Additionally, our monthly analysis found that institutional investors are increasingly willing to lend money to small businesses and that community and regional banks are approving nearly half of the small business loan applications they receive.
An aspiring entrepreneur in search of capital must prepare a professional business plan that describes what the company will do, its products and services, the management team that will run it, the target audience and how the firm will reach it. Ultimately, the business plan must examine the competitive landscape, explain the new firmâ€™s differentiation, and convince a potential funder that the company will be a success.
The business plan ultimately must persuade a potential lender to take the risk and lend money to the venture. The document must provide as much proof as possible that the business will be profitable in the long-term and be able to repay the loan with interest. So if you are serious about starting a business in 2008, remember, a successful business plan should follow this format:
1. Executive Summary: Write a concise, one-page or two-page description of the company. Include short-term and long-term goals, details of the product or service, management team experience, estimated startup costs, advertising/promotional plan, and financial projections.
2. Business Description: Detail what the company will do and the intended target audience. Obviously, this is a very important part of the business plan.
3. Competitive Analysis: Outline the competitive landscape, including the local marketplace and any potential virtual rivals. Examine their strengths and weaknesses objectively and outline how your business will effectively compete against them. Donâ€™t fall into the trap of trashing the competition. If theyâ€™ve been around for a while, they must be doing something right.
4. Product or Service: Describe the companyâ€™s offerings and explain what will make the firm successful in the marketplace.
5. Marketing Plan: Detail how the company will build its brand. Include the website link (if available), social media promotions planned, traditional advertising and public relations efforts. Outline how the company will build its sales pipeline, including attendance at trade shows and other sales efforts.
6. Management: Introduce the management of the company. Write a short bio for each key member of the management team and the experience that each person brings to the firm and in what areas they are well versed (operations, finance, marketing, etc.).
7. Financial Data: This may be the trickiest part of writing the business plan: estimating revenue and expenses for a company that does not yet exist. Call upon the experience of the firmâ€™s partners to create cash flow projections, a break-even analysis, and estimated profit-and-loss statements. If members of the management team are not experts in financial matters, seek the advice of friends, former colleagues and others with experience in the industry. Reach out to your local SBA office for a schedule of training courses they may be offering or to be partnered with a mentor from SCORE.
The financial information provided in the business plan must detail the firmâ€™s startup cost estimates. This is a critical element of the exercise; you canâ€™t ask for money until you know how much you need. Estimate the startup costs and then build in a 50 percent cushion or more. (You can hold onto the excess and use it for working capital or pay the money back to the lender early.)
8. Investment: The owner(s) of a new business must show that they have â€śskin in the game.â€ť Detail the amount of money each partner will invest into the business. Lenders will be skeptical of funding requests from an entrepreneur who is unwilling or unable to â€śput his money where his mouth is.â€ť
9. Appendices: Provide charts and graphs, mock ads and website design, logos, photos, video links, and other documentation that bolster the presentation.
Not everyone is a writer. Someone looking to launch a catering business may be great with cooking recipes but less apt to sit down and write a professional document that will land financing. Fortunately, there are many consultants who specialize in business plan writing and software programs, such as Business Plan Pro, which can guide you through the process and provide successful business plan templates. The SBA also provides online assistance
The economy has performed well during President Trumpâ€™s first year in the White House, and 2018 looks to be promising. Banks have been more willing to lend to small businesses than at any other time since the Great Recession, which began more than a decade ago. Further, aspiring entrepreneurs have many non-bank funding options available than they ever had before. Before approaching any of them take the time to write a professional looking business plan that can help secure traditional bank loans, SBA loans, or other types of financing needed to get your new business off the ground.