You have a passion that you want to turn into a business. For some, that’s the hardest part – coming up with the idea. The second hardest might very well be – writing the Business Plan.
Before you start talking yourself out of your great idea, let us help break it down for you.
The Big Picture
Think of it as a road map for your business that outlines the actions you’ll need to take and resources you’ll need to compile in order to get started. It’s a living document that should be updated either every year or every other year – to help you measure progress and move your business forward.
Itamar Chalif, one of our banking experts in Middleborough, highlights what potential business owners need to know when creating their plans.
Where to Start
Step one – identify the audience you intend to market the product or service to and start having conversations. If these are your potential customers, start building relationships now. Learn what they’re looking for and how much they’re willing to spend. There’s no substitution for building connections when it comes to your business.
After determining if this product or service is valid, examine the market and ask yourself:
Once you’ve answered these questions, you’re ready to start your plan. It should include the financials, human capital, capital investment, and marketing requirements for building and maintaining your business. Depending on what type of business you start, you may have other considerations, such as transportation and delivery of goods or services, to name a few.
Below, we break down the pieces of your plan in very general terms, but it’s important to remember that each part of your plan is intertwined and cannot be developed in a silo.
One of the most important parts of your plan is figuring out how much it will cost to open the doors of your business.
First, calculate the initial investment needed to get your business up and running. Up-front costs, such as renting or buying space, producing your product, hiring and training your team, finding the right legal and accounting teams, and defining marketing add up quickly, so leave no stone unturned.
After you have an idea of how much it will take to open the doors, you want to make sure you have enough money to get to the breakeven point, or when your revenue will equal ongoing expenses, such as rent, payroll or insurance.
PRO TIP: Remember to take seasonality into account because time of year can greatly affect how long it will take you to reach your break-even point in certain industries. If you’re starting a landscaping company in February, for instance, you’ll want to take into account that you may not see revenue until April, unless you also plan to plow snow.
Next, consider how you’ll cover those costs. You may use money you’ve saved yourself or what you’ve borrowed from family and friends. You might also consider seeking out investors, or taking out a loan from the bank. Keep in mind that each option has its own set of pros and cons which can impact your business. You should discuss the financial aspects of your business with your accountant, lawyer and banker, who should be core members of your team of business advisors, to ensure you’re on the path for financial success.
PRO TIP: While we all wish we had crystal balls to predict the future, we can’t know what it holds. Itamar suggests factoring in a minimum contingency budget of 10-15 percent into your cost projections as a cushion for the unexpected.
Determine how many employees you’ll need, how much you’ll pay them and how much it will cost to train them. Always keep in mind your long-term strategy, meaning not only the people you need at this moment, but also when your business starts to take off.
Another important consideration is what equipment your business will need, which depends on the type of business you’re opening. If you’re starting your own law practice, you may only need to invest in a laptop and basic office furniture. But if you’re opening a manufacturing company, you’ll need specialized industrial equipment.
If you’re renting or buying a space, you want to factor in the costs it will take to modify that space to fit your needs. You may also need to consider permitting and licensing costs, such as business and food service licenses if you’re opening a restaurant.
PRO TIP: Be sure to strategically consider what equipment should be bought new versus used. Think through the value and reasons you want to buy new instead of used, taking into account possible downtime for used equipment vs the initial cost savings. You also may want to consider if leasing equipment is right for your business.
Marketing is a vital aspect to the success of your business. It helps you reach your customers and increase their awareness of your product or service. When developing a marketing strategy, consider where your customers find information and the cost to get your product or service in front of them.
PRO TIP: Itamar often sees businesses cut marketing costs when things begin to slow down, but this may not be the best strategic move because marketing is what helps you reach customers who, ultimately, bring in revenue. Itamar noted that too often new business owners, attempting to save costs don’t hire the right professionals, or do things themselves.
For example, working with a family member who is a residential real estate attorney to write or review business contracts. Another example could be using the insurance agent who did a great job with their homeowner and car insurance but has no experience navigating the complex risks associated with commercial insurance. These types of decisions can often cause unintended consequences. It is imperative to work with the right advisors.
Rockland Trust has worked with thousands of business owners and is here to help you. Check out our Learning Center for more content designed to help you start, grow and maintain a thriving business. You can also stop by one of our branches across Massachusetts and Rhode Island to speak with our business banking experts or even click here to schedule an appointment.
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