You have a business idea that you know will be the next latest-and-greatest thing. Your product is what everybody needs, and you want to get it on the shelves now—right now. You dive into your venture, and realize that starting a business is more expensive than you realized. That’s okay. A majority of business owners come to this realization, even those who are some of the wealthiest in the world now. This is where start-up financing comes in, and you need a business plan to encourage others to invest in your idea.
The Need for a Plan
A business plan is a detailed document that explains what your idea is, how you intend to put up your own funding, how you intend to produce it, how you intend to market it, and your expected profits and losses. This seems like a lot, but if you think about it, it’s important to go into this much detail prior to starting anything. Alongside your potential investors, you, too, will see if your idea is really a good one. If after documenting everything it looks as if will take years for your business to start earning a profit, it might be best to rethink your strategy and build your business on something else.
They Aren’t Just for Startups
You must have a plan when you open your venture, but you can also use updated plans to fund expansion. Assume you are a product manufacturer and you have an idea for the next version of your existing product. You cannot begin production on the new product without cash flow, and all of your money is tied up in your current product’s manufacturing. You can write a business plan, just as you did when you started, that will give investors the entire picture of why they should lend you money to begin production on your new model. You can also use these plans to fund facility, office, or store expansion.
When you approach a financer to lend money for you to start or expand your business, you will not only need to fill out a loan application, you will also need to prove to this person or financial institution that you have a great idea that will become profitable. If it doesn’t, you won’t be able to pay the loan back, so a well-structured and detailed business plan is your first step in showing lenders that you have what it takes to borrow their money and pay it back.