A Startup! A new business plan! A new business is being born. Prepare.

Hallelujah!

Its a wonderful event, as a start-up of a new business is much like giving birth, it will control your life for a long while, many years,  its an act of passion and love, it will have peaks and valleys, success and failure, it will reach many of its goals and fall short on some…its a wonderful opportunity, no make that a total responsibility, to give this new entity the best chance possible for survival and success… like you would to a child.

Allot of cash, much debt and an enormous amount of time and effort will be invested and it will affect many people’s lives. This is the moment of truth as a well planned plan will give birth to a potentially successful enterprise. The investment in time and energy to make certain your plan is the best possible plan is a very good commitment.

You needs the best possible business plan you can devise. Recalling that eight  out of ten new start ups will fail within the first 18 months. We should ask why and understand that many pitfalls could have been avoided had the business plan addressed the issues and had the entrepreneur considered all the operating issues that may be encountered. This is sometimes very difficult to do with limited experience.

So lets identify what is required.

You must think long and hard and devise the mission statement, as it is the one opportunity you get to paint your vision and then build around it. Its very important, as are all the steps we shall discuss, so do it and you will see how valuable it may be in the near future as well as many years down the road.

Its your safety net, and when action is confusing and in doubt, refer to it and find clarity as it will bring you back to your central mission your vision your overall objectives and goals.

The type of organization you will become, be it a C or S corp., an LLC, a partnership or a sole proprietorship. This is a very important decision and should be done with advice and counsel and much consideration.

Once selected the bylaws or operating agreement must be drafted and we absolutely do not want a standard form.

We want to custom design the document to meet the needs of the equity owners, the cash investors, the sweat equity investors, the minority and the majority. There is no place for a standard form, have your lawyer draft one designed for your unique needs.

This is where we prevent disputes and problems as a well thought out set of by-laws or operating agreements will prevent disagreement later as most issue will be dealt with in advance and those that are not, there will be a method of moving the dispute into resolution so it will cease being a problem very soon. It provides answers and a process to resolve issues. Its critical for long term survival and prosperity, it is the rules  by which the business is run.

Such issues as majority votes, super majority votes, control over the board of directors, control over major material decisions, employment issues, how to handle invested cash, borrowed cash, dividends, payroll for the owners and investors, buy outs, exit and entry into the ownership, operational decision making, employment contracts, and a host of other issues must all be resolved in the by laws and operating agreements.

Typically these areas mentioned above are not considered and infrequently addressed with much serious effort and input. I like to compare it to a prenuptial agreement, resolving issues before they occur when all are friends.

If not done now, and left to be dealt with later when it is a problem and without tools or a process designed to help resolve issues, disagreements rapidly becomes ugly and destructive.

Internal organization, including developing the three classic departments, finance, operations and sales and marketing. Each requiring its own organization, staffing and business plans ready to be merged into the larger plan . Who, what, when, how much and whats the return, how much staffing and cash required for investment in capital equipment,  what additional support is required and who is responsible for the implementation.

Managers of each division must be identified, in small orgs some players will wear multiple hats and play many roles.

Job descriptions must be drafted to help determine responsibility, accountability and control.

Employee contracts for working owners, both cash and sweat equity investors, if they are involved in daily operations.

Once the plan is laid out, and a time frame recording projected revenues and costs and expenses are plotted, a major cash flow proforma can be created which demonstrates the cash in and cash out over time, including overhead, operations and finance departments, all coming together on one sheet. This will help you determine how much cash is required to be in the black and when the cash is needed. Its a financial map into the future, and answers allot of questions.

A capital formationplan is required under the finance heading, and the operational and sales and marketing requirements must be determined in advance based on expectations and projections of how much cash will be available and what the costs and return of doing business will be. A source and use plan for the projected required capital is necessary.

A review of your competition and the competitive advantages you may have because of a unique approach or some identifiable opportunity to be disclosed and reviewed as a basis for making the investment into this plan. It could be individual expertise, a dedicated client, or simply an identified opportunity.

Of course the ramp up must be carefully reviewed when costs abound and revenue may be scarce.

The sales and  marketing program must be fully developed with a cash flow for advertising, brokers. trade shows, and whatever other plans you may employ to create the sales revenue you need to succeed.

An operational plandescribing the career path, the incentive based reward system you will develop, the internal training program, the rules and requirements for participation in the incentive program, human resource requirements, job descriptions for the various positions, all that is required to operate effectively.

It may be that incentive based reward systems are committed to, a tracking monitoring and controlling system is discussed, and other appropriate strategies and plans designed to assure success are included so we all know what we are doing and were we are going and how we intend to get there.

The type of accounting system required and the financial reports we need should all be determined in advance.

A review of return on investment, and how and when the investors will be paid back must be carefully outlined.

The  additional risks that remain unidentified must also be revealed so they may be evaluated along with your plans for overcoming these issues, if not already explained.

Do this, do it well, do it correctly and you have a far better chance of succeeding then if you fail to adequately plan in advance and then have to plan and reconsider while in operation.

Further aside from assuring yourself and your investors the likelihood of your success, based on a well defined plan, it will support your capital formation efforts giving professional investors and lenders, such as banks, etc. a plan they can willingly invest in or lend against,  with confidence that the entrepreneurs know what they are doing as evidenced by a well designed plan.

You may want to consider your own credit worthiness, back ground and available collateral and cash to be invested before you ask a bank for a loan, as they will certainly ask these questions and thus you should  provide the information in the plan.

Get professional help if needed, but create the best pan you can. It will lay the foundation for your success or plant seeds for future problems…

Do it correctly and completely. Its a large job that will take time but well worth the effort. Its the best insurance you can buy. Its the only way success will occur and thus is a basic requirement. Call if you need help 413-549-2966