If you have a dream of owning your own business, being your own boss accountable only to yourself for your success, but unsure if you could ever get investors or money enough actually to open your business doors, they are steps you can take to make your dream come true.
Lay Out Your Business Plan
There are so many different ideas for small businesses that you can turn into a successful enterprise. But whatever the idea, you will need a business plan.
A successful business venture requires a well-structured plan. The Small Business Administration (SBA) stresses this, describing it as “a roadmap for how to build, manage and evolve your company”. Not only does a thorough business plan provide guidance throughout the various stages of launching and maintaining an enterprise; it also serves as an excellent way to critically analyze the critical components necessary for success.
According to the Small Business Administration, a well-crafted business plan can be your ticket to obtaining funding and partnering with major players in your industry. Investors need assurance that their investment will pay off – it’s up to you and your plan to demonstrate why working or investing in your company is the wise decision. By utilizing this tool strategically, you’ll give them exactly what they’re looking for!
There are different ways to structure a business plan, but the sections it should include are:
1. An Executive Summary:
This overviews your business and why you believe it will be successful.
2. Company Description:
Provide details of your business. What need does it fulfil? Who is the consumer? What are the strengths of your particular business over that of competitors?
3. Market Analysis: ‘
Who are your competitors? Is there a need for a business such as yours in the geographical area where you plan to locate your business?
4. Organization and Management:
What is the expected legal structure of your business? Partnership? Limited Liability Company (LLC)? An S or C corporation? Who will be the decision-makers?
5. Describe your Product or Service:
What are you selling? A product or service? How will this benefit your expected clientele?
6. Marketing and Sales:
Explain how you will obtain and keep customers.
7. Funding Request:
Outline the funding you are asking for and why you need it. Do you want debt or equity? Describe in detail how the funds will be used. Is the funding request for equipment, salaries, and bills?
8. Financial Projections:
Make a five-year plan. Show how you expect the business to grow and plan to pay back the funds.
9. Appendix:
This is where you provide supporting documents for every section of your business plan.
Assess Your Existing Finance and Income:
To evaluate your need for financing and consider how much money you have on hand and how much you will need to raise, you must first assess your existing financial situation and income. One way to do this is to carefully:
1. Prepare a budget.
Estimate all your expenses, including your private living expenses. Also include costs of getting your product to market, whether it is a tangible product or one providing services. Remember to include costs of CPAs, attorneys, licenses, rent for your business space, utilities, and all incidental expenses.
The next step is to project the income you expect your business to generate over the next few years.
2. Estimate cash flow from your new business.
Cash flow refers to all the money that comes into and goes out of the business. To be successful, of course, income must be greater than outflow. If you expect a lull in some months, can you make up the difference by making greater income in another month?
3. Analyze what you have discovered.
This means evaluating how much capital you will need to start your business honestly.
4. Use the financial statement to obtain funding.
When you apply for a loan with banks, the SBA, friends and family, crowdfunding, or grants, most funding sources require you to submit a financial statement with your loan application.
Possible Funding Options:
There are a number of possible funding resources available for new business owners. There are benefits and risks to each one. Some sources are:
Consider a small business loan
A small business loan from the Small Business Administration (SBA) may answer your funding needs. The SBA will want to see your business plan and expense sheet. It will also want to see your financial projections for the next five years.
Preparing these documents will let you know how much money you need to ask for and will provide the bank with the information it needs to approve your loan.
Crowdfunding
Crowdfunding is when people give money to you without being investors. The funds you receive are to help you with your business, but the donors do not expect you to return the funds. They may want a gift, like the product you are selling or equity in your business but without you obligated to return funds.
This puts you totally in control of the business, like self-funding, in that you are not accountable to anyone. It has less risk than self-funding in that if your business fails, you do not lose your own money and do not have to pay back the funds you lost.
There are quite a few crowdfunding sources. Read the fine print and choose carefully, so you are not surprised later to find out you committed to something you did not know you were committing to.
Self-Funding
Self-funding is not for everyone, but if you can swing it, it might be the route to go. You use your own resources to support your business. Resources may come from family members, friends, your savings account, or even from your retirement funds like your 401(k) or IRA.
Before you tap into any retirement fund, weigh the risks of penalties for early withdrawal. Check with a financial advisor before you use this method.
The upside of self-funding is that you are solely accountable only to yourself. The downside is that you assume all the risk. If your business does not do as well as you expect it to, your personal resources may be lost.
Grants
The SBA does not generally provide grants for start-up businesses but offers grants for those engaged in scientific research. It also offers grants to non-profit organizations and education organizations that support and encourage entrepreneurship.
Loans and Grants for Women:
The SBA provides several sources that help women find loans and grants to start a business. NerdWallet lists the seven best resources for women entrepreneurs. It itemizes the type of loan or grant available, the maximum amount of funding available and the minimum credit score you must have to qualify for the loan.
The Lenders are:
- SBA (regular loan)
- SBA (express loan)
- Fora Financial
- Bluevine (line of credit)
- OnDeck
- Credibility Capital
- Fundbox
If you follow these suggestions and prepare a detailed business plan that you can submit to lenders or those interested in investing in your business, you will be just steps away from the day you begin your first day of “employment” where you are your own boss.