Want to be your own boss? Ready to turn your hobby into a career? Got a great idea and thinking about launching a business? If you've answered yes to any of these questions, you are ready to become an entrepreneur.
This can be an exciting journey, but before you take off, you should make sure you have a plan. To create an effective business plan, keep these tips in mind.
Why Do You Need a Business Plan?
To put it simply, a business plan helps you organize your process. You outline your goals for the business and how you plan to achieve them. Plans are also essential for financing your business.
Depending on your needs, you can use your business plan to make sure you have adequate cash on hand to pursue your goals, or you can use your business plan to collaborate with investors or lenders to fund your efforts.
What Should You Include in Your Business Plan?
Business plans can be short and to the point or long and detailed. Ultimately, as the business owner, you get to decide how you want to structure your plan, but you may want to include the following elements:
- Prototypes of products or descriptions of services.
- Your main objectives for the business in the form of a mission statement.
- Analysis of the industry and how your business fits in.
- Analysis of the market and a look at the demand for your products or services.
- Analysis of your main competitors.
- How you plan to reach prospective customers through marketing or advertising.
- The average projected cost of acquiring a customer.
- The projected value of your customers.
- 12-month expense projections, including start-up and operating costs.
- An overview of your organizational structure and management teams.
- How you plan to track your success with reports and key performance indicators (KPI)
- Financing objectives for the business.
In short, your plan should explain what your business plans to do and how you expect to achieve those goals.
When Should You Create a Business Plan?
You can create a business plan whenever you are comfortable, but research indicates that an effective time to create a plan is when you are talking with customers and preparing marketing materials. Writing a plan at this point, could potentially increase your chance of viability by 27%.1
On average, entrepreneurs could potentially see their profitability increase by 8%1 if they create a plan between six and 12 months of deciding to start a business. At this time in the venture, your ideas are still relatively fresh and new, but they have also had time to simmer a little bit. Writing your plan too early can cause you to overlook certain elements, but writing the plan too late can cause you to miss valuable financing or planning opportunities.
How to Perfect Your Business Plan
Your first plan is not a final draft. Reach out to other people in your industry for feedback on your plan, or consider finding a business mentor to help you. As you pitch your plans to investors or others, watch their reactions, listen to their questions, and make adjustments to your plan as needed.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.