With the promise of a New Year often comes the inspiration for leaving an unsatisfying job. Many people will start job hunting immediately. Others will wait until they receive their 2017 bonuses. Among them will be entrepreneurial minded individuals who use their bonus for starting a new business.
The signature of Treasury Secretary Steven Mnuchin is seen on an uncut sheet of $1 dollar notes at the U.S. Bureau of Engraving and Printing in Washington, D.C., on Wednesday, Nov. 15, 2017. Credit: Andrew Harrer/Bloomberg
People who receive substantially large bonuses may be able to completely self-fund their ventures. More likely, aspiring entrepreneurs will seek outside business financing. In 2017, approval rates for small business loan requests hit post-recession highs at big banks, according to the December Biz2Credit Small Business Lending Index, which tracked November figures. Further, small banks are granting almost half of their requests for financing, and newer sources of funding, such as institutional investors, are increasingly becoming active in the small business lending marketplace.
An important step in securing capital is having a well written business plan that provides a detailed description of the products and services the company will offer, who will operate it, the target market and competitive landscape in the local area, and its differentiation and advantages that will lead to success.
Since the business plan ultimately is a tool for securing financing, it should include an estimate of startup costs. Entrepreneurs who are starting a venture in an industry with which they have experience will likely have an easier time estimating costs than those who are trying something entirely new. Finding a partner or a mentor with experience will be very helpful in making realistic cost estimates.
Above all, the business plan is a tool that helps entrepreneurs convince potential lenders that the venture has a strong chance of being profitable.