Recently I was questioned about an article I wrote for Business Insider almost two years ago. The article discussed whether or not a business plan was needed.
I wrote that if the business proposition was sound and funding was available, then creating a full-blown business plan would likely take time away from initiating the business. I said there may be an advantage to starting the business immediately and not having an opportunity pass you by.
Our experience, however, is that such situations are extremely rare, from the standpoints that business opportunities are understood adequately and that acting quickly is necessary. Usually an opportunity does not require being first to market. In fact, there can be a significant advantage in acting with a little more understanding, caution and thoughtfulness.
If you think immediate entry into a business is critical, then, at a minimum, you should discuss the business proposition with an experienced adviser or mentor to test your understanding and value of the opportunity.
SCORE's advice continues to be to do your homework by completing a business plan. At the SCORE.org website, you can download a comprehensive business-plan template.
If external funding is needed, then a business plan will be required.
For many of my clients, I have recommended addressing these five elements:
1. BUSINESS DESCRIPTION
Provide a detailed description, including the products and services you will provide. Describe the structure and ownership. Where will the business be located? Will startup funding and initial working capital be required, and to what extent?
What are the products and services you offer? What and who are your target market? Who are your competitors? Do you have a distinctive advantage versus your competitors? Have you established a pricing strategy? What are your sales goals and the timeline to describe them?
Include a balance sheet, a detailed summary of start-up expenses, projected monthly expenses for the first year (quarterly for the second year and annual for the third), projected sales in units and dollars, and a monthly cash flow statement for the first year. Describe when the expected break-even point will be reached. Describe your financial contribution to the business, the amount of additional required funds and the anticipated source of such funds.
Describe how you will provide your goods and/or services. Will employees be required? How will they be compensated? If materials are required, have sources been identified? Discuss assurances of supply. Are there special requirements - licenses, permits, bonding, insurance - required to operate your business?
The summary is likely to be the initial section of the business plan. Include a description of the business, ownership, market focus, startup timing, location, the amount of funding required and the projected revenues for the first three years of operation.
The above topics can be addressed in a short time, often within a week. This will help determine the viability of the business proposition from a go, no-go perspective. At SCORE, if the business looks like a go, we'll check the SCORE template and complete the plan. Even the most experienced business person will often overlook a key issue or two.
A comprehensive business plan is the initial investment leading to a successful venture. Statistics indicate that working with a SCORE mentor more than doubles the likelihood of a successful and sustainable startup.