Getting Started Overview

Everything you need to know about starting a business in a nutshell from Ventureport.org™—the Online Outfitter for the Entrepreneur’s Journey

Overview: The Business Plan

Essentially, there are two types of business plans: the one you use to raise money and another to run your business. Having a great business plan is critical to raising money, because it helps build the confidence of potential investors by demonstrating you can actually do the job. The less someone knows you, the more they will look for concrete evidence that you can do it.

In truth, those entrepreneurs who choose to "sell their way" into business often dispense with a business plan and do it all in their heads. And, many of these people have succeeded. That said, the best-run businesses have an ongoing strategic planning process they put in writing, so they discipline themselves to always watch out for opportunities, challenges, and change. This type of business plan focuses not on trying to raise money but on keeping your organization's eye on the key goals, measurable objectives, strategy, plans, and actions needed to attain those goals. This type of business plan can consist of a three page document, in outline form, with simple performance measures, such as sales and profits by product or service, or by specific types of customers.

Projections. No matter what, your plan had better include some kind of financial projections. You can cut out all of the talk when it comes to making financial projects: business planning boils down to realistically estimating how much money is going to come in versus how much is going to flow out and when. Don't worry about being right on the numbers; that's almost impossible. Base your projections on the most conservative estimates possible.

Cashing out. If you are talking to potential investors, whether angel investors or venture capitalists, you will often hear the term "exit strategy." This refers to the means by which the investors will cash out; i.e., sell their stock to get their money back and gain their profit. Unless your company goes public, the only way investors can get their money back is to sell the company to someone else, or sell their shares back to you. Make sure you consider the "exit strategy" issue if you take on investors, since they may seek to cash out sooner than you're ready. You should also consider your "exit strategy." What is your goal for the organization: to keep it forever for you and your children, to go public, or to sell it.

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