We have been talking about the questions a potential entrepreneur needs to ask and answer before starting a business. Last week we discussed the keys to success for any business. This week we will be talking about the need for creating a business plan before starting a new endeavor.
Do you need a business plan? Yes. That is the only correct answer. How elaborate a plan is the only question needing an answer. If you are going to a bank or a venture capitalist or crowd funding, then you will most likely need a full blown business plan. If you are self funding, then you won't need a full plan, but you still need the pro-forma statements and the marketing plan. I can't tell you how often small businesses fail because the revenue comes in much slower than anticipated and they lack adequate working capital to make it to the break even point.
A detailed and specific marketing plan is needed to help determine exactly how you expect customers/clients to find your new business. Your target customer needs to be identified and the proper method of reaching them determined. You may need some expert assistance in determining this and creating a business plan will help you realize this.
The pro-forma financial statements are key to insuring that you know how much money you will need for your start-up. We recommend creating one version which is your best estimate of what will happen, another which is the worse case scenario (revenue comes in at half the pace you expect) and another which is best case (revenue comes in much faster than anticipated). The best case scenario can become a worse case if you haven't planned for it and lack the working capital to fulfill orders.
Do I need a business plan for my start-up? Absolutely. Can I create it myself? Perhaps-there are numerous software programs which you can use to do so. We are fortunate in our area to have a class offered which walks potential small business owners through the process of writing a business plan. We often are contacted by participants of this class who have written most of the plan and just need assistance getting the financials finished.
Next week, we will delve into how to determine how much money you need to start-up a business.