Starting a business in a recession may seem counter-intuitive, but it's really one of the best times to start a company, you just have to move toward it in the right way and with the right approach.
The very first thing an exploratory business owner should do is start gathering information, organize and catalog it. This is crucial to the development of the entire endeavor. The very next thing (and something that should be ever present before and during writing a business plan) is making it attractive to investors.
Key elements of a business plan:
Cost projections and all expenses are both the cold reality and the key markers for a business forecast. Where you are putting the start-up capital and to what sweat-equity you're devoting are the leading indicators of the areas you feel are most crucial – keep this in mind because investors are about numbers.
Identify where and what you are not spending to bolster capital resources. In other words, spell-out where and how much you are saving by doing this instead of that. Investors like to see you're always thinking about how to best use capital rather then just how spend it.
Keep it short and on-message. Including expansion projections might show an entrepreneurial spirit but is puts the cart before the horse. Investors don't want to put their money into something that doesn't yet exist while investing money in something that doesn't yet exist. More plainly, they like to see you concent rating on the task at hand rather than planning for an unpredictable future.
Use examples of established business' and how you'll capture a profitable market share. When I wrote Cyclopedia Music Theory, I talked to music students and teachers, sharing with them how the book would be laid-out and how I would address and illustrate the subject matter in a new way. Because I took their opinions and suggests to heart, the book came out far better than had I written it in a vacuum.
The most common mistakes made in business planning:
By far, the most common mistakes made in business planning are not in the business plan itself. They're not in the plan because they're not even considered. And exactly what are those things? First and foremost is the entrepreneur willingness to surround their business with guns and begin firing – this I refer to as "frontloading".
Ask practically anyone who has built a home or opened a business if the project came in on time and under budget…you'll not get many "yes" answers, maybe not even one. Why is this? Simply put, they spent too much, expected too much, and wanted too much. Here are the most common mistakes I've found in business planning:
Frontloading – this means spending too much up front while opening a business. The problem is while it may give the business all the bells and whistles, it is also gambling on doing a lot of business and meeting or exceeding all projections.
Advertising – when is the last time you enjoyed listening to television or radio commercials? In every business plan I've seen, there are figures and charts detailing the ad budget and its whirlwind results. Air ad buys are money spent with no way of quantifying their results; print ads are more traceable (if they include some sort of tracker like a coupon). This is not to discount advertising but I prefer to spend on advertising after opening the doors and actually seeing the target audience. Lastly, advertising is more effective by word of mouth, particularly if it is the business owner's own words coming out of their mouth. A couple "on the street" campaigns will grab far more attention and be better received than air or print ads.
Keeping up with the Jones' – I use this phrase with my clients as well. All it really means is do you have to have the newest and latest in order to operate your business? Sales people love getting the call from new business owners looking for a fully functional P.O.S. system (Point Of Sale). And in they come with a suite of inventory tracking, sales reports, internet access, et cetera claiming it'll pay for itself with all of its usability. When in fact, it would take someone months to learn how to access and use of its functions – for those of you that doubt me, take a look at your keyboard right now, find the Pause/Break key and explain its function.
Not properly protecting inventory – cameras and all other reactive security devices aren't going to help a b
How do I write a business plan that will attract investors?
As a business consultant, I write plans for clients of my practice, Retail Consulting Solutions, with one major factor in mind – will this plan appeal to an investor? By this I mean will it be fiscally sound and profitable? Now, this may seen all-too-obvious, but just because a client's plan is financially sensible (in the sense it would be all-inclusive of projected expenses and earnings) but that it is realistic in those projections and accounts for other scenarios without rendering it as under-profitable.
In other words, investors like to see profit calculations but are more at ease when they don't see a frontloaded plan – they want an assurance if the reality doesn't measure up to the estimates, they won't be faced with an outright loss.
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