Failure to Plan is a Plan to Failure: SMB Startup Basics for Dummies

It’s so true isn’t it? If you don’t plan, you’re doomed to failure in almost every area of life. That’s why we’re all taught in school that we need to write and constantly update a five-year plan, and to constantly evaluate our goals to determine whether we’re on the track, or merely jumping around in the sticks without a clue where we’re going!

This just happens to also be why banks and investors won’t touch your startup with a ten foot pole if you don’t have a detailed business plan in tow with you. You’re not going to sell the savvy financial minds of the world on your idea without one – no matter how good a salesperson you are!

Business planning
photo credit: pinkpurse

So, you’re here to learn a thing or two about preparing your first business plan, or perhaps need to brush up as you’ve forgotten some important details from your last experience. Remember that preparedness is really the key. You have an idea – you’re ready to charge forward – now you need to put in the work!

Preparing a comprehensive plan that will get you funded is hard. You can’t “fudge” details. Even if you get away with sloppy research or telling little white lies – you’re only lying to yourself in the end.

A Business Plan Pays You Back Later On

As you put in the time (phone calls, research, analysis) and even your own money, remember that this is just the first step in the right direction. If you take your plan seriously, it’ll pay you back once funding is secured and you end up hitting the ground running with your latest venture.

Prove That You’re Ready to Run a Business!

If you have a good business plan, it shows that you’re prepared for the good and bad. If you had the money to start a business without any backers, you’d still be smart to complete a full business plan. After all, if your finished plan isn’t compelling, you’re either wasting your money or the angel investors – or (gasp) both!

Below, you’ll learn about the basics of preparing a plan, and find loads of resources you can use too. You don’t need a “software that does that” or anything more than the info on this page, and perhaps a comprehensive reference book that breaks down every section into the simplest terms possible.

Streamlined 5-Step Business Plan Model

1. Executive Summary

Plain and simple, this is the first page that your angel investor will see. Tell them directly what it is that you want from them. Don’t bury the message in compliments or try to dazzle them with overt details.

Tell them the company name, the industry you’re in, a proposed start date for the company, where you’re located, and how much money you want. Don’t worry about explanations and supporting data here – short and sweet is best!

Some great samples can be found here:

2. Business Environment

Whether this is a home business, or a multi-tiered corporation: Let the investor know each location you’ll own/rent, building and property sizes, number of employees, management structure, ownership breakdown, and the services you provide. There doesn’t need to be a specific order to how this information is organized in this section, just don’t bounce around from one detail to another.

Mention day-to-day operations and how they’ll contribute to the business’s success, including logistics, how instructions are communicated, and the total daily cost of operation (leave other financials for the “Financial Data” section). If it’s a sole proprietorship, then the management breakdown won’t be necessary.

3. Market Description

This section will be longer. Describe the industry your company’s based in and discuss what the current “temperature” is in that industry. Is it getting hotter every day; steadily warm; or cold but primed for a heat infusion? Talk about complimentary products out there that will help your business succeed.

Mention any variables that will position your new company in a place where you’ll make money quickly, such as gaps in the competition, breakout trends, etc. Some sources recommend mentioning potential negatives here too, but it isn’t necessary – don’t lie if asked, but keep the outlook positive in your plan.

Detailing the current state of the industry, and the customer’s within it, will help get your investor in the right mindset when they read your financials later. A more detailed description can be viewed here: Analysis

4. Product Design & Development

This section is for articulating the design plans for your product or service, along with charting the progress the investor can expect to see in the coming months, years, decade, etc. Your product is your business, so spend a lot of time in gathering ideas and putting them to paper.

Talk about all R&D planning (current and future), marketing ideas and how you plan to implement them, and a reasonable budget you have in mind in order to pull everything together and make it work. This area of your plan will prove to the investor whether you have a solid action plan or not.

5. Financial Data

And now we’re down to the meat and potatoes. How much money you’re asking for, how much everything actually costs, and your profit projections. This will make or break your ability to secure funding and everything you’ve told them helps to back up these numbers.

Some investors will jump to this section first to look for red flags in your projected balance sheet, financial indicators, breakeven analysis, projected cashflows, and other pertinent financial data that you can view here.

There’s nothing easy about this area of your plan, and it’s always recommended to hire an accountant for this process. Better they tell you how ridiculous your idea is than to suffer the embarrassment in a boardroom or loan office!

Further reading: