Steps for starting a business and writing a business plan.
A business plan (BP) is required for any business seeking financing. However, it is recommended for all businesses. The BP for a start-up requiring financing should have detailed support for any assumptions. The BP for an acquisition of an existing business that is seeking financing does not need as much detail, but should include the prior 3 years actual financials and projections for the next 2 years.
The BP for a start-up should include:
1. Executive summary with a description of the business, goals, timeline, target markets, differentiation, strategy for success, management team skills and experience, 2-3 year key financial projections, summary of the total project cost and sources for any funding requirements. Take one point from each section of the business plan. This should be no longer than 2 pages. Make sure the information in the summary matches throughout the business plan. Keep to the facts and stay away from too many unsupported adjectives.
2. Details of the business with history of the business, legal structure, organization, ownership, location
3. A marketing plan including products and services offered, competitive advantages, method of distribution, analysis of competition, competitive strategy, pricing strategy, marketing budget. Use of a library to access databases with market averages for comparison is recommended, e.g. RMA, IRS averages by SIC
4. A 3-5 year financial plan with income statement, balance sheet, and cash flow statements. The first year should be monthly with the remaining data stated annually. Start-up costs and fixed assets should be listed, along with a break-even analysis (Break-even = Fixed Costs/(Unit Price of product/service – Unit Variable Cost)). Include a summary with total project cost, how much will be input by the borrower, funds expected from other sources like a bank, owner carried, etc. - breakdown the total costs by: capital requirements for the business, working capital, SBA guarantee fee (if applicable), closing costs, and processing fees.
5. Supporting documents such as resumes, legal documents, references, credit scores/reports of owners