You gain an advantage by building your business on paper first. A business plan's value goes beyond its ability to help secure a loan package for you. It's a working document that helps you prepare for opportunities as well as difficulties.
Just as you wouldn't start off on a cross-country drive without a road map, you shouldn't embark on your new business without a business plan to guide you. A business plan won't automatically make you a success, but it will help you avoid some common causes of business failure, such as undercapitalization or lack of an adequate market. You'll find weak spots in your business idea that you'll be able to repair. You'll also discover areas with potential you may not have thought about before -- and ways to profit from them.
There are three primary parts to a business plan.
- The business concept, where you discuss the industry, your business structure, your product or service and how you plan to make your business a success.
- The marketplace section, in which you describe and analyze potential customers: who and where they are, what makes them buy and so on. You'll also describe your competition and how you'll position yourself to beat it.
- The financial section contains your income and cash flow statement, balance sheet and other financial ratios, such as break-even analysis. This part may require help from your accountant and a good spreadsheet software program.
Writing a plan forces you to think through every aspect of your venture. Only by putting together a business plan can you decide whether you should proceed with your idea or look for a new one. Glean some inspiration and guidelines from resources below:
• Check out Entrepreneur.com's Business Plan How-To Guide.
• Download or print the free business plan guide from the U.S. Small Business Administration.
• You'll find dozens of real business plans in our Sample Business Plan list.
Tomorrow -- Day 5: Identify Sources of Startup Financing.