I. General Description
Before you begin your new business, you must create your first business plan. It might morph as you begin the application, but creating this will help you to see problems and answers before you get too involved to adapt. It also makes you look more professional if lenders or investors are required.
First, come up with a general description of your desired business. While you don’t have to be too narrow, don’t go too broad either. Ex- Don’t say I want to work in “Health”. Better to say “I want to own a gym.” OR “I want to own a health food store.”, etc.
1. Type of Business
Your first business plan needs to decide the type of business structure and general duties. Do you want to go into retail or wholesale, do you want to be a seller or manufacturer, do you want to offer products or services, etc.? Describe what it is that you want to sell.
2. Legal Organization
Consider in your first business plan what type of business structure would fit best for you. (Click for 1st part of 4 part article on business structures) Are you alone or are there other owners, will you need capital to start and/or maintain, do you have that capital or will it need to be borrowed, what liabilities are associated with your type of business, do you want to be private forever or do you want to be public at some point, etc.?
The number of owners and liabilities businesses will have can guide you to which structure with which to begin. This will have both legal and tax implications by which you pick. (But don’t stress too much, it can be changed later if needed)
3. Location
Your first business plan must consider the space needed to perform your business. Will the location be home-based, rental space, or owned-space; will you need just a desk and computer or do you need floor space to display your product; will you do most of your work at your business or on the road at locations; do you need to worry about zoning for your business; what spaces are available in your area (or how do you find out), etc.?
If out of your home, write down where in your home you will designate for just the business (this can be important for taxes). If you need space, draw a rough diagram of how much space you need for your inventory, storage, office, etc. The more you have in your mind before you go looking the quicker you will know if something is right when you look at it.
Also, do research to if your business needs to be in a certain city zoning area to operate to help narrow down the search or know if you need to ask for something to be re-zoned.
Bonus: Consider in your first business plan what is around the locations that could be a help or detriment to operating your business. A law office may need to be near a courthouse, but a bakery may want to consider if being next to a gym on the outskirts of town helps or hurts their chances.
4. Needed Permits and Licenses
List in your first business plan any license you may need to do the job and any permits you may need to obtain to build a building or operate that business. Also, consider the license you may need if you plan to expand the business to other avenues in the future
5. How It Will be Run and Staff Needs
An extension of 2. Legal Organization, consider what you need beyond owners. Do you need secretaries, do you need salespersons, do you need laborers, do you need managers, do you need drivers, will you use independent contractors, do you need an in-house bookkeeper, etc.
You may even want to map out things you don’t need yet, but if you hit certain milestones that you will need to add.
6. Coverage
What kind of insurance coverages will you need? Will you have to provide coverages for your employees (if any)? If you are operating out of the house, are there new riders you need to add to your policy?
II. Now Get More Specific in Your Plans and Products or Services
- Give a brief description of each product or service you will provide
- Give a pricing guide to these products or services and if these prices will change for different
- How will you acquire the products you sell- do you make them or do you buy from a wholesaler and resell?
III. Create a Management Plan
Draw up a business tree (kind of like a family tree) based on the structure you decided to make your business.
Who are the:
1. Owners/Members/Initial Stockholders/Board of Directors
Give a detailed list of this group (even if just one), giving background and qualifications of these individuals who will be making the highest level of decisions for the business.
2. Managers and Employees
Next list this group that will be more responsible for the day-to-day decision making. Be sure to highlight anyone who may fall in both of the owners level and manager level
3. Advisors and Independent Contractors
Include information about key advisors to your business like your attorneys, CPAs, insurance agents, or banks. Be sure to list these in your employee section if they are in-house and not independent and you are just one of many clients. Also, list any independent contractors that you may rely heavily on to do your job that is not under the advisor’s discretion.
IV. Create an Overall Mission and an Operating Plan
Overall Mission
The overall mission in the first business plan is what you want to have accomplished in your business over an extended period of time. A restaurant may want to feed a certain number of people in a given time period, a dress shop may want to make the best wedding/prom/pageant of each female they clothe. It is made up of the long-term goals or what impact you want your business to have had when you look back at some point in the life of the business.
Day-to-day Operations
Description of how you will operate on a daily basis. Processes, marketing, hours open, days open, daily goals, etc. that you want to look back at closing each day to see if accomplished. Maybe even day-specific if your business has different operations depending on the day of the week.
Accounting and Finance
What accounting methods will you use? How do you handle billing and collections? How do you do payroll? What are your tax requirements? (sales tax, employee withholdings, tax status chosen) Are these handled in-house or outside of business?
Technology
What are the requirements of technology to operate your business? What additional technology will you choose to use? Will you operate online? What are your hardware and software? What is your phone system? What is your office equipment needs both in-house and outside in the world?
V. Create Your Clientele Avatar
In your first business plan, create an avatar of the ideal client. Include things like:
- Person or business, characteristics, age, gender, station in life, buying behavior, social status, marital status, education level, income, etc. Get as detailed as you can with what matters, you can expand/ eliminate disqualifiers later.
- List information about the “surrounding pool” of people or businesses. How many people fit your ideal client avatar? What are the demographic percentages of your avatar in the area you serve? And is there enough to make it?
VI. Create a List of the Competition for Your Products or Services
This has two purposes in the first business plan- 1. it tells you what you are up against to make the sale and 2. it gives you a guide to see what they do successful that you can improve and what they do bad that you can avoid.
Make your list to include:
- Your direct competitors- who basically sells the same thing as you
- Your indirect competitors- who sells different but similar thing to you
- Numbers of each
- 3 Biggest in each category
- Your likeness and differences
- How you can emphasis these differences or how you are better at the likenesses
Just to give you a short example to explain better, let’s say you own a hamburger franchise:
- What are the other hamburger franchises (direct)
- What are the sandwich franchises, chicken franchises, pizza franchises (indirect)
- How many are there of each?
- Who are the top 2-3 in each?
- How are you alike and how are you different?
- How can you market these likenesses and differences to your advantage?
VII. Design a Marketing Strategy for Your Business
Design a marketing strategy to promote your business’s products or services to the market. Include in your first business plan marketing strategy things like:
- Top three ways you will introduce yourself and your products/services to your avatar
- Types of paid advertising you will use and how much you can spend on these
- Personal (free) methods you will use to promote
- Types of marketing materials you will use to promote
- Consider how much you will spend initially and ongoing
VIII. Financial Statements for Your Business
We all know that money is the grease that keeps the wheels in motion. The creation of these documents not only gives you a more in-depth look at your business needs, but it will show a much more professional business if you need to approach banks or investors for capital.
Startup Cost Worksheet
What are the financial needs for equipment, supplies, and other items that will have to be acquired prior to ever running your business? Don’t forget to also include in this section of your first business plan the cost of any licenses or permits, rent, deposits, initial expenditures on advisors, cost of creating the business in fees, and other costs.
Beginning Balance Sheet
Your first business plan should also contain a detailed list of what assets and liabilities that the business has on the day of startup/opening of doors.
First Year Month-by-Month Budget
This is the first business plan’s cash flow statement that shows the intake and outgo of money through sales, collections, and expenditure broken down into a monthly statement.
Projected Profit/Loss Statement (P/L)
Do a forecast out for two years and five years in your first business plan to show what is expected to be income and expenses, gross profits, tax liabilities, and net income for these time periods.
Break-Even Analysis
When selling products, this is the point in which you must reach in sales to break even, this is the point at which the income from the sales pays the cost of inventory, utilities, payroll, and other expenses of the period of time. Do this for a month, quarter, six-month, and year analysis.
Sources and Uses of Funds
This is an itemization of all the financial needs of the business along with a list of funds either provided or promised to the business, and what you are asking for from a lender or investor. This will include your personal investment or future promised investments plus any other contracts already made prior to starting date or other lenders/investors already secured.
IX. Executive Summary
While this is the last step, it is actually going to be the first thing you show from your first business plan once everything is created. This is like a beefy table of contents at the beginning of the book. Sometimes this is the only thing an investor or banker may look at so it needs to be perfect. Brief enough to not get bogged down in, but thorough enough to get the whole picture. It needs to show enough to get the “yes” on its own or interesting enough to make the reader want to go deeper to give the “yes”.
Here is what you need to emphasize:
- Company info
- Name
- Date founded, if you bought a existing business- date of purchase
- Address
- Secretary of State letter showing business structure
- One or two sentence summation of products or services of the business
- Purpose of Business Paragraph that include a Mission Statement
- General Description of:
- Target market
- Competition and Your Position with Them
- Your Competitive Advantage/ Uniqueness
- Discussion of your Needs
- Startup Cost
- Initial Inventory
- Equipment/Technology
- Rent/Mortgage
- Revolving or Seasonal Needs
- Statement of Your Investment
- Expectation of Break-Even Timing or Time to Profit Predictions
X. Conclusion
Hopefully, since you do the Executive Summary last, it will give you a chance to review and revise all of the other documents. My best advice is once you are done with the Executive Summary, go back and review everything in your first business plan a second time and revise until perfect.
Just as a last piece of advice, consider going to Canva.com and creating graphics and pictures to enforce the facts and figures or add images to help you and any investor/lender better see what your first business plan is trying to say.
Also, Grammarly is a great tool to download to your computer to help the first business plan look even more professional with spelling and grammar correcting suggestions.
Good Luck with your Business Venture.