Starting a new business is an exciting venture but although new business owners are optimistic, they must also be realistic about expectations. The best way to ensure that you are not going into the startup without understanding the risks is to create a detailed business plan. If you hope to obtain financing for any portion of your new company, a business plan will be a requirement.
The best way to know what should be included in your business plan is to understand what a financier is looking for when they decide whether or not to loan money to (or invest in) a new startup. Even if you are not seeking financing, put yourself in the shoes of someone who may want to invest in your company and think about what they would want to know. With that in mind, here are some areas that should be planned out in detail:
Management: The management of the business is critical to its long-term success. Even the best product or service can be ruined by poor management and a mediocre product can be (at the very least) mildly successful, if the company is run by competent managers. When putting together your management team, it is important to have people not only with vast experience that is relevant to their roles and responsibilities but also a proven history of success working in a team environment. A quality management team will set a good impression on potential lenders and provide a solid foundation for your successful business plan.
Product/Service Quality: Any objective observer will want to know what sets your company apart from others in your arena. Ask yourself what is different about your concept and in what ways will it be superior to the competition? If you are going to be a franchise for an existing company such as a fast food restaurant chain or cleaning service, the risk will be lower because there is likely to be a proven system in place to capture a certain percentage of the market.
Market Competition: Whether you are franchising or developing a concept from scratch, you will need to conduct a market analysis to determine the local competition and the level of interest for your offering. This analysis will also examine the local demographics to find out if there are enough people in the area that are likely to need your services. For example, if you are opening a senior care center, be sure it is located in an area with a sizable elderly population. Whoever your target market is, make sure you are locating in an area where you can cater to them.
Financial Projections: Finally, a solid business plan will present detailed projections of revenue, expenses, profit, annual growth, etc. These numbers should err on the conservative side so you can prove that the business will work even under adverse conditions. To ensure that you are presenting the most accurate figures, it is best to contract the services of an accounting professional that can take an objective look at your business from the outside and determine what you can realistically expect.
