Oftentimes when starting a business, new entrepreneurs overlook one of the most important documents they will create which is their business plan. Business plans serve dual purposes; first, they provide a roadmap for a new business owner to monitor their progress against their goals, and they can help when you are seeking financial backing.
To make sure your business plan is as effective as possible, you should first understand the target audience. If you are using it for internal purposes only, you would need to have less information than if you were presenting it to a lender for the purposes of seeking financing. Here are some of the top tips to create an effective business plan designed to meet your specific needs.
- Spell Out a Clear Vision – an effective business plan will have your vision for your business clearly explained. This is a blueprint for your goals for your business, where you expect to start, your expectations for the future, and your overall business goals.
- Define Your Strengths and Opportunities – have an explanation of various opportunities your business may capitalize on and define what strengths you have which allow you to capitalize on those opportunities. This should be done after using various analysis including Strengths, Weakness, Opportunity, and Threats (SWOT), Political, Economic, Social, and Technological (PEST) and Social, Technological, Economic, Environmental, Political, Legal, and Ethical (STEEPLE).
- Set Realistic Goals – most entrepreneurs are ready to hit the ground running and most have grand ideas for their business. However, an effective business plan cannot be built on imagination alone, it must be grounded. Not only will this allow prospective investors to see that you are considering all possibilities, it also allows you to celebrate progress. Since you may be hiring new employees, having clear, attainable goals also helps keep morale strong.
- Use Realistic Time Frames – while it may be tempting to set up deadlines to accomplish various goals, make sure you take a close look at what your goals are and what is reasonable to expect for reaching those goals. It may also be beneficial to set up multiple time frames and see which ones are most logical for the market.
- Allow for Worst-Case Scenarios – part of developing an effective business plan is being a realist. This means making sure you have a best- and worst-case scenario for each of your business goals. Your sales, hiring strategies, equipment needs, etc. should all be based on what happens if you are not reaching your immediate targets.
- Know your Market – it is imperative you understand your target customer. For example, if your business is consumer driven, you should have an idea of what time of year they are most likely to need your products or services. If your target market is other businesses, you will have to determine when they sign contracts for purchases of products and services.
- Back Up Your Claims – once you set up your financial projections, be prepared to back up your projections. This is important, particularly if you are seeking financing. Lenders will want to understand why you reached the conclusions you reached. This is done by having documentation available to demonstrate your claims are reality-based.
- Introduce Your Management Team – your business plan should have information about your management team included. This is important, particularly if you are entering a competitive field. Make sure your management team resumes and other supporting documents are included in your business plan. This helps provide investors with a comfort level about the team operating the business.
- Solid Financial Data – your business plan financials are one of the key elements of an effective business plan. Remember, this is one area of your business plan where you will want to be ultra conservative. It is better to underestimate than set expectations too high, particularly when you are just starting out. Account for all potential expenses including business licensing, start-up costs, taxes, as well as legal and accounting assistance.
- Clearly Define Outside Help – there are few entrepreneurs who have all the skills needed to operate a business on their own. Make sure you clearly define consultants, IT personnel, accountants, etc. whom you may need to help you turn your idea into reality.
- Seek Quality Legal Assistance – every entrepreneur should be in contact with a skilled business attorney. Contacting an attorney when starting a Minnesota business is important for several reasons. While you may write your business plan yourself, having an attorney help you with the structure and formation for your business is important.
Some of the issues Tanko Law Firm can help you with include:
- Determining business structure – understanding whether to set up a partnership, LLC, or Corporation is important for numerous reasons including your tax-filing status. It is also important to remember your business structure may determine your personal liability.
- Assist with needed contracts – every business owner will need to have certain contracts. You should have an attorney who can review and help manage vendor, employee, partner, and outside contractor contracts.
- Business succession planning – the time to develop a succession plan is when you are starting your business. You need to consider what happens if you suddenly fall ill, should you decide to retire early, or what might happen if your business fails. Having an exit plan makes good business sense.
- Address Risk Management Issues – business owners are often unaware of the various risks that are inherent in owning a business. For example, what happens if someone is injured on your property, what do you do if your business is sued, and what happens if a customer is injured because of a product your manufactured. An attorney who has experience dealing with business law can help you develop a risk-assessment and management plan.
Montana entrepreneurs should work with a skilled business attorney when they are forming a business and when developing a business plan. If you are one of the many residents who are considering starting a business, contact Tanko Law Office at 406-257-3711 or use our online contact form to schedule a free initial consultation with a Montana business attorney.