The five steps to take before writing your business plan
When you have an idea for a business, it's natural to get excited and want to push that momentum forward, launching into your enterprise as soon as possible. However, it's better to take a step back and calmly consider what lies ahead.
4 Aug 2017 12:28
Most prospective owners realise that before you can start a business, you need to write a business plan
, which will outline not only the central idea and operations of the business, but also its path to success, alternative options, and potential profitability. But before you invest the time and resources in creating that formal document, there are some steps you should take to prepare yourself as an entrepreneur. What to do before writing a business plan
Before you start outlining your business plan, you’ll want to take at least the following steps:
Are you ready to write a business plan?
- Repair your personal credit. First, take a look at your personal finances, including your personal credit. When your business gets up and running, you’ll be able to rely on your business’s credit score for things like loan applications and securing terms with new vendors, but in the meantime, banks and investors will be looking at your personal credit when making important determinations that affect your business. If your credit score leaves something to be desired, you can use free credit repair services to improve it before applying for any loans. Getting your personal finances in order will also help you survive any “dry” periods when your business isn’t bringing in revenue, which are especially common in the first few years.
- Prepare to leave your current job. Don’t submit your two weeks’ notice just because you’re thinking about potentially starting a business, but you do prepare for the possibility of departure. It’s certainly possible to start a business while simultaneously retaining a full-time job, but it’s usually better if you dedicate your full attention to one or the other. If you feel strongly pulled toward the entrepreneurial life, you can begin making preparations by documenting some of your core responsibilities, training people around you (especially underlings who might take your place), and potentially talking to your supervisors about the possibility of a departure in the near future.
- Talk to other business owners. Before taking the plunge, you need to understand the full picture of an entrepreneurial lifestyle — not just the glamour of succeeding with a multibillion-dollar deal. Talk to some other entrepreneurs, preferably in your area, and preferably in a niche similar to your main consideration. They’ll be able to tell you about the ups and downs, provide some pointers on getting started, and will ultimately help you decide whether this is truly the right path for you.
- Talk to your friends and family members. There’s no shortage of successful businesses that sounded crazy when they were first pitched — but remember, survivorship bias is at play in these examples. If an idea sounds good to you but questionable to everyone else in your life, it may not be worth pursuing. Before putting any more effort into your idea, have a talk with your friends and family members to see what they think of your idea — and how you’d perform as an entrepreneur. Hopefully, you’ll get some honest and enlightening answers.
- Come up with a backup plan. The exact statistic is inconsistent based on what type of businesses you examine and what source you’re consulting, but the bottom line is that most businesses eventually fail. If your business fails to provide you with recurring revenue, how are you going to make money? Will you be able to get your job back? Will you start another business or try a new career path? Can you depend on a spouse temporarily until you figure things out? There are many feasible options here, but you should have at least a few on your back burner in case things go south.
If you’ve taken all the above steps and you still feel confident that your idea will work, it’s time to make preparations for your actual business plan. If you’ve never written a business plan before, this may seem daunting, but there’s one golden rule that can guide you to success: research everything.
Even if something seems intuitive to you, such as the desirability of your product
, you’ll need to back it up with objective, demonstrable research if you want your business plan to succeed. Whether you’re pitching to investors, applying for a loan, or just trying to attract initial clients, a business plan with a foundation in objective data will be more likely to achieve your goals than one written on a whim.