Since the economic crisis, more and more small business have been popping up all over the place. We see an increase in freelancers, contractors and sole-traders. Many people have decided to take opportunities into their own hand and fate into their pockets. This is a good development for all world economies but just how prepared are these new (small) businesses for the world of entrepreneurship?
One of the first steps in going it alone is to create a business plan. If you were to visit your business advice centre, one of the first things to be advised would be to create a business plan. Business plans are required in many situations, for example, applying for credit at a bank or seeking investment. As a freelancer or contractor, you may assume that this doesn’t apply to you but for all businesses, big and small, a clear, tangible idea of what you want to achieve is essential.
It not all about money
There are many advantages, other than financial, in having a business plan. Business plans force you to think seriously about your business, where you are now, where you want to go and how you will achieve this. They provide structure, vision and direction and without one, you’re likely to get stranded at some point.
When starting up for yourself, you generally have a simple idea of what you are going to offer as a service, or what your product will be. Through writing a business plan you are also given the chance to think of extra revenue streams. This could be in the form extra products or services but it could also be in the form of growth through partnerships local, national or internationally. A business plan allows you to create the type of business you desire from a starting point which can be adapted along to the way.
When it is about money
Today there are several ways to generate funding for your business. You can go to bank or even to a micro credit facility. You can go to family and friends and you can get crowdfunded. Whichever course you choose, you’ll most certainly need a business plan with a clear financial case. A financial case is a 3 year breakdown of your financial prognosis. In reality, only the first few months of any financial case is realistic. This does not mean that the other months shouldn’t be developed seriously but rather it means its difficult to predict growth after a period of about 6 months. Your financial case should also have a conservative, realistic and positive version. This shows that you’ve thought about every scenario but remember also, a bank or investor does not want to see a conservative projection. For an investor, that simply wouldn’t be the right company to invest in.
Take a look at the next article which explains all what’s included in a business plan.