By Dustin Ray
Starting up a successful business is no small feat. Many prospective entrepreneurs are daunted by the statistics and the harsh reality that 18.4% of businesses fail within their first 365 days, according to the Bureau of Labor Statistics. It’s bound to be a competitive landscape, no matter what industry you’re in.
Luckily, your first year doesn’t have to be a flop with some careful planning and preparation. Creating and following a business plan, avoiding common pitfalls, taking advantage of resources, and learning from others are all important steps in getting your new business off the ground. This guide is designed to help get you off to a good start.
Do You Need a Business Plan?
Technically, no. Only five states require new businesses to create a plan during their formation. That said, it’s a smart, solid move for any business. You’ve likely heard the cliché “failing to plan is planning to fail,” and this rings especially true for new business owners.
How to Write a Business Plan, Step by Step
Every business plan should contain at least the following:
- Begin with an “Executive Summary,” which should include a high-level overview of everything you’re going to cover in the business plan, as well as your business name, mission statement, and values.
- Draft a “Company Description,” which should include detailed information about your business’s industry and offerings, including ways you’ll stand out from the competition.
- Include a “Market Analysis,” which describes industry trends and more detailed information about your target market and competition.
- Outline your business’s “Organization and Management Structure,” which may include an organizational chart with information about each team’s responsibilities. This is where you’ll include your business’s legal entity, such as an LLC or sole proprietorship.
- Present your “Services and Products” and how they will benefit your customers or clients. This is where you’ll include trademark and copyright info.
- Explain your “Marketing and Sales Strategy,” which, at its core, is a plan for how you’ll attract and retain customers. Depending on your industry, you’ll include info about the sales process, pricing strategy, and how you’ll promote your products.
- Look ahead with “Financial Projects and Data,” one of the most important parts of your plan, especially if you’re looking to attract investors. This should include forecasts for income and expenditures for the next five years, at minimum.
- Close with “Supporting Documents and Appendix,” which are documents to support claims you’ve made throughout the plan. These may include sales data, permits, contracts, and more.
Common Mistakes When Writing a Business Plan
Writing your business plan doesn’t have to be complicated, especially if you’re on the lookout for common mistakes new business owners make. These include:
- Not having a business plan or a clear purpose for starting a business: Without a clear vision, businesses tend to get lost in competitive markets and fail. A business plan will be your guiding light and essentially force you to get specific on your purpose and goals.
- Forgetting to conduct a fair analysis of strengths and weaknesses: It’s easy to underestimate potential weaknesses or overestimate strengths and how they will flair in the market.
- Underestimating or ignoring your competition: No matter how unique your business is, other companies always have the potential to take a slice of your pie. Just be careful not to overinflate the threat of competition, or investors may begin to worry.
- Forecasting unrealistic projections: While it’s good to be optimistic — and even bullish at times — you also need to stay realistic. You may not hit 1 million products sold or five-star reviews earned in your first year. A business plan needs to include achievable goals and projections, or else you could be set up for failure from the start.
- Including too much information: A clear, concise plan that includes the most important elements of your business is what will hit home with investors — not hundreds of pages of supplemental information that dilutes your impact.
- Not backing up claims, data, or statistics: Make sure to cite your sources under “Supporting Documents and Appendix” so your plan is credible.
- Making grammar, spelling, and punctuation errors: It’s easy to make small typos or forget a period, but these mistakes will make your plan seem less professional. If you decide to look for investors down the line, these mistakes could turn off potential investors.
First 365 Days: Getting Your Business Rolling
An official business plan is great, but if you’re not following through on the action items and continuing to learn and grow, your business won’t grow either. Your biggest focus for your first year of business should include:
- Fine-tuning your business plan. This includes market research and product tweaking.
- Keeping an eye on finances. Make sure you’re tracking towards the goals in your business plan and that numbers are adding up.
- Listening to customer feedback and reviews and adjusting based on what your target market needs and wants. It’s much easier to make changes in your business’s early stages versus years down the road.
- Staying connected in a network of like-minded business owners or other industry professionals. Find a mentor. See what you can glean from the decades of collective experience of others.
Choosing the Right Structure for Your Business
Many businesses don’t take the time to set up their legal business entity right away. Doing this upfront saves a lot of trouble down the line. Here are the most common business entities:
|Limited Liability Corporation (LLC)
|As one of the most popular types of business entities, LLCs are often a good fit for small organizations. They’re cheaper and easier to run than C or S Corporations.
|Formed on the state level, S Corporations offer protections such as the separation of personal and business liability. They include more legalities and compliance than LLCs and are ideal for larger businesses.
|C Corporations are the most expensive and complex businesses, typically offering more than what small businesses need. They must issue stock, have a board of directors, and be subject to “double taxation.”
|Filing as a nonprofit corporation allows you the same rights and privileges as a for-profit corporation, with the stipulation that any profits (if not donated or allocated towards public benefit) must go towards the existence and expansion of the corporation.
|Sole Proprietorship or General Partnership
|If you start a business by yourself or with a partner and don’t register as a legal business entity, you’re automatically considered a sole proprietorship or unincorporated partnership. This typically isn’t recommended, as it doesn’t include the protections offered in other business structures.
Free Small Business Tools You Need
You don’t need an expensive tech stack and dozens of pricey tools during your first year. Your business can thrive with many resources that are available for free.
- Market Research Tools: Google Trends, Answer the Public, Pew Research Center
- Tax and Accounting Tools: Wave Accounting Software, ZipBooks Accounting Software, Incfile Business & Accounting service
- Marketing Tools: FindThatLead, Buffer, Hootsuite, Mailchimp
- SEO Tools: Google Ads Keyword Planner, Keyword Explorer, Link Explorer
- Website Tools: WordPress, Figma, Wix, Invision Studio
- Product Management and Productivity Tools: Asana, ClickUp, Evernote, Google Drive
- Customer Relationship Management: HubSpot CRM, Capsule CRM
- Customer Feedback Software: Zonka, Qualaroo, TypeForm
Marketing Your Business in the First 365 Days
The “Marketing and Sales Strategy” section of your business plan should include information on how you’ll market your business. Consider the following tactics:
- Website: New businesses should focus heavily on having a clean, reliable website that’s easy to navigate and visible in search. This is true even if your business operates solely in a brick-and-mortar space.
- Google My Business: If you have a physical location, an accurate and up-to-date Google My Business profile is essential. This includes contact information, hours, reviews, a link to your website, and more. Set up your profile here.
- Local SEO: Local SEO is important for making your business visible on Google for location-related searches. These are high-intent users, meaning they’re likely to purchase. One study found that 88% of users who did a local search on mobile called or visited a store within 24 hours.
- Social Media: As part of your market research, you should know which social media platforms your target audience spends the most time browsing. Post high-quality content on a regular basis to build trust and give an inside look into your company’s happenings.
- Email Marketing: Your subscribers can turn out to be your most loyal customers, so focus on collecting email addresses right away.
For more resources, check out the U.S. Chamber of Commerce’s recommendations on free marketing tools for small businesses.
Tips from Real Business Owners for the First 365 Days
One of the best things about starting a new business is connecting with your community and learning from new people along the way. Below are real stories from entrepreneurs like you.
Set Achievable Goals, No Matter How Small
Stay Flexible and Positive
Don’t Feel Like You Have to Go It Alone
Small Business FAQs
Want to know more about how to ensure success in your first 365 days? Here are some common questions:
Yes. Even in the early days of your venture, a business credit card will keep your business and personal assets separate. Plus, business credit cards typically come with higher limits, which means more spending potential than you’d get with a personal line of credit.
Yes. Running a small business from the comfort of your home has never been easier. If you sell goods or services online, a home-based business is the perfect option to keep overhead costs low.
The need for licenses and permits depends on the type of small business. Depending on your state of business, you may need a business license. Use a business license search tool to check out what’s required in your area. If you intend to sell food or beverage items, you may need additional permits and inspections to ensure safety and cleanliness.
A business plan covers the entire operational plan for your business. It includes marketing as just one cog in the wheel. A marketing plan, on the other hand, is a deep dive into marketing-related strategies, including target markets, messaging, social media, SEO, and more.
A well-planned business is one that’s set up for a lucrative future. As an entrepreneur, your first 365 days set the tone for the lifespan of your venture. A fair assessment of your offerings, the market, the competition, and your target audience now will pay dividends for years to come.