How to Overcome Pitfalls When Your Business Is New
Dealing with the unforeseen is the short description of an entrepreneur’s job, no matter what niche your business operates in. If you’re looking for ways to sort out the turbulent early years so you can organize around a sustainable long-term strategy, you need to know how to put together a business plan. The right plan will help you develop processes for handling your day-to-day business management, alongside protocols for emergency situations.
What goes into a plan for a business? It’s a complex document that covers every aspect of your company’s operation. That means you will need to include a list of the duties of your major officers, staff positions that need to be filled to reach full operation, the management structure, identified customers, marketing strategies, and even a plan for expansion as you grow. It covers everything you or your lender might need to know about where your company is going and what you’ll be doing with your finances. Most importantly, it provides you with an opportunity to plan out your cash flow management early, by identifying your costs and payment cycles so you can better predict when you’ll need funds available.
One aspect of the business plan that many first-time entrepreneurs overlook is the plan for credit and financing. It’s very common to document the assets you are investing to grow the business, including both funds you put in and investments from partners. It’s less common for new entrepreneurs to remember to include a detailed plan for financing that documents the role each product will have in your business cycle. This helps lenders identify the purpose of the financing you’re applying for, and it also documents that you have found ways to make your other credit needs work. This is important, because one of the reasons new businesses have trouble finding financing is because they expect one loan product to do all the work.
Plan to find some kind of easy to access short-term financing, like a revolving credit line or accessible asset financing option, to complement any long-term loans you will need. This allows you to have a separate source of funding for cash flow management, smoothing out unexpected expenses so they can be absorbed over a longer term. It can also help extend your payment windows when you are in a slow part of your cycle. It’s important not to overextend, because it can be hard to access the equipment loans and other financing you will need for your long-term growth, but having no other credit options can be just as limiting. The key is finding the balance for your business, and that means having a detailed business plan that accounts for all these needs.