The 5 Steps You Need to Take Before Writing Your Business Plan
If you want to start a business, you need to have a business plan. However, before you even begin the drafting process for your business plan, there are some steps you should take to get your personal finances, logistics, and ideas in order. Without that foundation, writing a business plan will be substantially more difficult, so take the time to organize yourself in advance.
Steps to Take Before Writing a Business Plan
Follow these steps to give yourself the best platform for writing a business plan:
1. Get your personal finances in order.
First, you’ll need to get your personal finances in order. If you’re going to start a business, you’ll need capital, which means you may need personal loans and funding. Use a credit score calculator to determine your current personal credit, and take the time to get it in good shape by paying down your debts and paying all your bills on time. Try to minimize your outstanding debts, and simultaneously build up an emergency fund. Your first few months and years as a business owner may not be especially profitable, so you need to be prepared.
2. Create a backup plan for your career and income.
Some people claim that 90 percent of businesses fail within the first year of operations. In reality, the figure is closer to 20 percent, but the majority of businesses do fail within 10 years. For that reason, you need to have a backup plan. Businesses aren’t a get-rich-quick scheme, so if you want to survive reliably, you’ll need to have a backup career in mind, or at least a source of income you can rely on as a temporary measure.
3. Do some baseline research.
You’re going to be doing a ton of research when you put your business plan together for the first time, but before you jump into that, do some baseline market and competitive research to make sure your idea is feasible. You may discover that another business is already doing what you had in mind, or that your intended target demographics just aren’t as interested in your products as you thought.
4. Talk to other entrepreneurs.
Remember, there’s a psychological component to being a successful entrepreneur. You’re going to be working in a high-stress environment, working long hours, and dealing with the threat of a potential business collapse. Talk to other entrepreneurs about their experience, and get an accurate glimpse into the world of entrepreneurship before you take the next steps.
5. Learn what makes an “effective” business plan.
Your business plan isn’t just an item on a checklist. It’s going to serve as the blueprint for your business and one of the best tools you have for pitching to both prospective investors and potential clients. Learning some of the most important fundamentals is essential if you want your draft to reflect what investors and clients are interested in.
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Creating an Initial Draft
With all those pieces in order, you should be ready to begin the actual drafting process. Your formatting and direction will vary based on your business plan and personal preferences, but these tips should help you get started on the right foot:
Back everything with facts.
Back every statement in your business plan with verifiable facts. For example, don’t say that middle-aged men will be interested in your product; prove it with survey data or other demographic information.
In your business plan, you’ll need to forecast your financials, including your estimated revenue and profits. It’s tempting to get excited here and think of the best-case scenario, but it’s better for your future to estimate conservatively.
Second-guess yourself; it’s going to help you challenge your assumptions and craft a more fact-based document. Your potential investors are going to be scrutinizing every detail, so you need to stay a step ahead of them.
Get second opinions.
After your first draft (or perhaps while you’re writing), get second and third opinions on your work. You may learn some new things or think of alternate ways to present your information.
Your business plan shouldn’t be written in stone. Instead, write it to be adaptable to a number of unexpected turns. Write in a handful of alternative business paths and backup plans should your original plans fail. Doing so could open the door to new opportunities.
Once you have drafted your business plan, you can start the work of getting your business funded, staffed, and off the ground. Be prepared to make a number of changes to your original plan as you gather more information and gain experience, and rest easy knowing you’ve gotten the best potential start.