When launching a new business, there are many steps that you need to take, from choosing the right legal structure to getting a location and more. However, before those steps are taken, one of the most important things you can do for a strong start is to create your startup business plan and financial projections. With these in place, you’ll be on track to successfully launch and grow your business.
In this guide, you’ll learn why a startup business plan and financial projections are essential for your business, the components of a great startup business plan, and resources to help you get the financing you need to launch the business of your dreams.
Why is a startup business plan necessary?
It’s often said that when you launch a new business without a plan, it’s like taking a long-distance road trip without using a GPS or map. You may eventually get where you’re going, but it will take a whole lot longer and cost you a whole lot more along the way.
The time you spend clarifying your vision and goals, researching competition, and outlining plans to reach your target audience will give you the roadmap you need to launch successfully.
Your plan and projections allow you to:
- Identify opportunities and risks: Your plan and projections help you spot potential strengths and weaknesses in your business model. For example, as you analyze your business idea and market viability, you can uncover potential risks, such as unforeseen expenses and dips in sales. Once you identify risks, you can plan for strategies to reduce them.
- Make better-informed decisions: Your business plan and projections give you a glimpse into the “hows-and-whys” of your business; You’ll develop insights on the goods and services you’ll provide, how these are different or better than what’s already available, your revenue goals, and the potential financial health of your business. This helps you make better decisions for everything from where to locate your business to staffing, inventory, and marketing.
As you share your business idea with others, you’ll also find that friends, family members, mentors, and potential customers and investors will have a lot of ideas about how to run your business and what you should offer. With a solid plan in-hand, you can focus on the suggestions that will support and strengthen your operations and offerings. - Better plan and allocate resources: Projections anticipate your future needs, like funds for inventory, staffing, and marketing. Your projections help you identify and plan for revenue cycles and potential shortfalls, such as seasonal cycles, so you can use resources more effectively. This ensures that you have the funds necessary for equipment, employees, and inventory, like by getting a working capital loan or financing for equipment and inventory.
- Communicate your vision and goals in compelling ways: Your business plan is a communication tool that outlines your goals, target market, and competitive advantages. With this, you can create a brief executive summary to share with potential investors, identify key points to develop into marketing and outreach materials, or to share your vision with new employees.
In addition, lenders rely on your plan and projections to assess the potential profitability of your venture. That’s why a thoughtful and thorough plan and projections can help you get a startup business loan to show that you understand your industry and have identified an opportunity. This creates credibility for you as a business owner – even before you’ve launched your amazing new business.
What are the components of a great startup business plan?
When you’re developing your startup plan, there will be two primary components: a narrative business plan and your financial projections – usually, for the first two years of business.
Your narrative business plan
This is where you tell the story of your business. Your narrative plan doesn’t need to be long or complex – many great business plans are only a few pages long. The key is to ensure that your information isn’t just concise, but that it’s also relevant and well-researched.
Be sure to include:
- The meat of your business: The goods or services you’ll offer, the opportunity in the market, and why you believe your business will leverage the opportunity. Guide the reader to picture your business. For example, state whether it will be an online-only or in-person business and explain those choices.
- Your vision and goals: Clearly define your goals for the shorter and longer terms. For example, you can think of it in terms of Year 1, Year 3, Year 5, and Year 10.
- Your target customers: Provide a detailed explanation of your key customers and be specific. For example, “Urban apartment dwellers in mid-size metro areas who are between 22-35 years old with household incomes between $60,000 and $90,000 and who follow at least one gardening influencer,” is more targeted than “everyone.”
- Competitive analysis: Who are your competitors, where are they, how do they reach target customers, and how will you gain your share of them? A thorough competitive analysis is one of the most important aspects of your plan – it can highlight opportunities and challenges that could be expensive.
- Marketing plans: Using your target-customer description and competitive analysis, you can create a cost-effective startup marketing plan. Through your research, you may find that the way you planned to reach your customers is already saturated by your competitors. Use this opportunity to get creative about reaching your customers.
- You and your team’s experience: Explain your experience in your field – anything that’s relevant to your business’s success. Make sure to address how you’ll fill additional skill or staffing needs. For example, will you hire employees, outsource skill-specific projects or functions, engage freelancers, or bring on seasonal temps?
Your startup financial projections
Your financial projections are your best forecast of how your business will do financially, if everything goes according to plan. This can be the most challenging part because many of the financial projections and documents will be new to you. The key is to give it your best shot, based on your research and everything you know about your planned business.
Lenders simply want to see that your financial projections are thoughtful, well-researched, and realistic. It’s also a good idea to create likely financial scenarios, as well as best-case and worst-case, to show how you’d be prepared in any situation.
Financial projections for a startup business typically include:
- The funds that you have available in-hand to launch your business.
- A two- or three-year projection of all revenue and expenses, broken down monthly and by category. This free template from SCORE is a good place to start.
There are excellent resources to support you
Throughout the country, there are many free and low-cost resources available to help small business owners launch and grow with strength and confidence. Wherever your business is located, you’ll likely find a nearby:
- Small Business Development Centers (SBDCs): These organizations are located throughout the U.S., often on college campuses. They offer free business-advisement services, including review of your business plan and projections.
- SCORE offices: These organizations are in communities across the U.S. The volunteers and mentors are former business owners and executives who share their knowledge, insight, and experience with you. The SCORE website also has links to numerous templates, webinars, and local resources and events for small business owners.
- Business resources focused on the specific needs and opportunities for women, minorities, veterans, Native Americans, and more. These organizations give valuable data and insights to guide you as you develop your plan and provide mentoring or other special services along your business journey.
- Town, city, or county business-development agencies and Chambers of Commerce: Most local and regional governments have an economic- and/or business-development arm that can give you guidance on local initiatives or insight, as well as local data, to support your business plan’s research.
- Rural business-development offices, including USDA offices have data and resources that can benefit businesses in rural locations, so if your business falls into this category, reach out to learn more.
Pursuit is here to help small businesses at every stage
Preparation is essential for a successful business, so gather your ideas and research, and create your startup business plan and projections. Then, meet with someone from your local/regional SBDC, SCORE, or other business-development office for support. They’re seasoned professionals and business owners who can make the entire process easier for you.
As you’re developing your plan and projections, take a look at loans and a line of credit from Pursuit. Our products and services are tailored specifically to meet the needs of small businesses in every stage and we provide financing for businesses in New York, New Jersey, Pennsylvania, Connecticut, Illinois, Nevada, and Washington with a range of resources and help to support a strong launch and growth.
Contact us today to learn more.
