With the promise of a New Year often comes the inspiration for leaving an unsatisfying job. Many people will start job hunting immediately. Others will wait until they receive their 2017 bonuses. Among them will be entrepreneurial minded individuals who use their bonus for starting a new business.
People who receive substantially large bonuses may be able to completely self-fund their ventures. More likely, aspiring entrepreneurs will seek outside business financing. In 2017, approval rates for small business loan requests hit post-recession highs at big banks, according to the December Biz2Credit Small Business Lending Index, which tracked November figures. Further, small banks are granting almost half of their requests for financing, and newer sources of funding, such as institutional investors, are increasingly becoming active in the small business lending marketplace.
An important step in securing capital is having a well written business plan that provides a detailed description of the products and services the company will offer, who will operate it, the target market and competitive landscape in the local area, and its differentiation and advantages that will lead to success.
Since the business plan ultimately is a tool for securing financing, it should include an estimate of startup costs. Entrepreneurs who are starting a venture in an industry with which they have experience will likely have an easier time estimating costs than those who are trying something entirely new. Finding a partner or a mentor with experience will be very helpful in making realistic cost estimates.
Above all, the business plan is a tool that helps entrepreneurs convince potential lenders that the venture has a strong chance of being profitable.
Here is what a winning business plan should include:
Executive Summary: Prepare a one-page explanation of the business that concisely and effectively explains its short-term and long-term goals, operations, marketing plan, and revenue projections. (This executive summary may be the only part of the business plan that a loan officer will take the time to examine. Be sure to make it compelling.)
Business Description: Explain what does the company will do and who the target audience of buyers will be.
Target Market and Competitive Landscape: Analyze the competition objectively and then outline why the new venture will take market share.
Product or Service: Explain in detail how your product or service works and its advantages.
Sales, Marketing and Promotion: Detail the plans for informing the marketplace about the company. Start with the website, since the first thing that a reader may do is look to the internet for information. Include forms of advertising, traditional public relations activities and social media promotion that will help build awareness. Include planned attendance of trade shows, sampling efforts, and other sales promotions.
Management: Describe who the experience level of the senior management of the company. A one-paragraph bio of each or key individual will suffice.
Financial Data: Provide a break-even analysis and cash flow projections, along with sample balance sheets and profit-and-loss statements. Doing this can be challenging since the business is not up and running. Rely on partner experience and use the internet to conduct research. Local SBA offices can also provide assistance in writing this section of the business plan.
With the economy showing signs of strength, aspiring entrepreneurs have many funding options among banks, institutional investors, microlenders and others. No matter what the source, having a well written business plan is an important first step for securing the capital needed to launch a new business in 2018.
Investment: Lenders want to know that the owners of a new business have “skin in the game.” Explain how much money each partner is willing to put into the business. After all, if the owners aren’t willing to put up their own money, why would an investor be willing to do so?
Appendices: Include logos, photographs, video links, charts and graphs, letters of reference, and other supporting documents.
With the economy showing signs of strength, aspiring entrepreneurs have many funding options among banks, institutional investors, microlenders and others. No matter what the source, having a well written business plan is an important first step for securing the capital needed to launch a new business in 2018. Best of luck!