Start Your Own Small Business

Wouldn't it be great to be able to quit your job, be your own boss and earn a paycheck from the comfort of your own home? The good news is that with a little planning and some startup money, it is possible!

Creating the Concept
Before quitting their jobs, the potential entrepreneurs must first think of a concept, product or service to generate a steady income. And while that may sound easy, it's not. You should conceive a plan that puts your knowledge, experience and expertise to use but in a way that allows you to make the most amount of your money.

When first thinking of some business ideas, start with areas you already have a great deal of interest, equipment and materials for. This will help cut down on the startup costs for your company and also let you hit the ground running when you do hang out your shingle. Also, peruse the local paper and advertisements to see what other types of businesses are out there. Are there other similar businesses in your neighborhood or is there a business area that is lacking?

Doing something you like isn't the only consideration. You need to get an idea of the prospects for the potential business. Is it a business with a market? Can you make money at it? This will require some research into the marketplace as well as how other similar businesses have fared.

Developing a Work Space
Your home is where you live. This means that its primary function is to serve as a dwelling for you and your family - not as a warehouse or meeting place for your business and its clients. Make certain that if you are considering entering the manufacturing business (for example) that your garage or shed is large enough to handle your work - without forcing your family and your vehicles into stormy weather.

Similarly, if your work will be computer-based, make sure that you have the technology necessary to give your idea a fighting chance. In addition, make sure that you have a dedicated area that's cut off from the rest of the house and that can afford you some privacy. Remember, hearing a barking dog or a crying baby in the background when you are trying to work or meet with a client may not be ideal for you or your family.

Outsourcing Partners/Employees
While it would be great to be the sole owner of your company and have complete control of every aspect, sometimes a lack of funds or experience make it necessary to have a partner. In this case, consider someone that is bright, will represent the company well, and has some sort of expertise in the business you are developing, be it sales, marketing, book-keeping, or other financial matters.

Also, try to define the tasks that you and your partner(s) will be responsible for before opening up shop. That way, there will be fewer disagreements and the business will operate more smoothly. Also, make sure that all partners are legally cared for by the company, and that the proper forms are filed with the regulatory authorities - this may mean filing twice and paying for title changes if you need to find a new partner, but it will protect both of you in the long run.

Next, decide if you'll need employees - whether now or in the future. If so, put some thought into how you will get them and what you will pay them for their work. Also, think about how you'll do payroll, and whether people will want to work from your home, from their own homes or if you'll need to find another facility to house them.

Doing Your Research
Some books on forming a small business suggest that after hatching an idea, an entrepreneur should just "go for it." However, this bold approach could land you in some shaky territory.

Instead, a good first move is to start asking family and friends what they think about your small business idea. Consider asking them specific questions such as:

• Would you purchase this particular product and/or service?
• What do you think its worth?
• What is the best way to market the idea?
• Is this something that you think is a fad, or do you feel it could be a viable business for the long term?
• Is there anything you can think of to improve this idea?
• What other businesses in this field have you heard of or do you currently use for this product/service?

If you're married and/or have kids, you should also be asking your family how they feel about you quitting your job and working from home. This will affect them on a psychological and financial level. If any of their answers are negative, you should spend some time discussing their concerns and decide whether your goal is worth continuing against their wishes.

After obtaining all of this feedback, go back to the drawing board and see if the idea can be improved upon so that your product or service can be differentiated from the competition. Remember, you want to hit the ground running and turn as many heads as possible when first starting off!

Finding Funding
Once you have an idea and the approval of your family, you need to decide how you are going to finance it. Most businesses will need at least a little startup income. This investment will hopefully help you break even after a year, but keep in mind that even successful businesses can remain in deficit for the first few years. Because of this, you will want to tap into a few different sources of funding. Some of these include:

• A small-business loan
• Savings
• Money generated from other investments
• Family/friends who will act as investors
• Personal loan from the bank
• Home equity loan
• Credit cards (as a last resort)

Source capital that won't hamper your longer-term security. In other words, try to avoid racking up costly credit card debt that could cost 20% or more in yearly interest fees. Also, try to avoid borrowing against your 401(k) or other similar plans as this may adversely affect your retirement.

Finally, one of the best things you can do before you take the entrepreneurial leap is to build up an emergency fund to fall back on if your company doesn't break even for a few months. Three months of living expenses is a minimum goal for a new business owner, but even more will help take the stress off of you and let you spend your energy on your company. (To learn more, see Build Yourself An Emergency Fund.)

Covering Your Bases
All business owners should think about what would happen to the enterprise and the revenue streams being generated if health or other issues were to prevent them from being involved in the business. In other words, if the entrepreneur were to become disabled, who would takeover? Could the business survive?

Consider these issues beforehand and determine whether disability income insurance makes sense, or if a partner could fill the void caused by your absence. (To find out more about protecting your company, see The Disability Insurance Policy: Now In English, Protecting Your Income Source and Protect Your Company From Lawsuits.)

Foreseeing the Future
It's great to own a business, but ultimately the entrepreneur will probably want to retire or move on to other challenges. With that in mind, you should create a business plan that discusses how you will transfer, sell or close your company. If your business depends on your unique knowledge and contacts, it may not be able to be assumed by another party.

Conclusion
There are few things more satisfying and rewarding than launching and owning your own home-based business, but before diving in, be sure to do your homework. Making a business work is not an easy task, but proper planning will help to increase its chances of success.

Are You An Entrepreneur

Many people dream of starting their own businesses, but not everyone is cut out for this line of work. Being employed by someone else offers a slew of advantages, from health insurance and matching retirement contributions to a regular schedule and the company of coworkers.

Entrepreneurs: Nature or Nurture?
Are good leaders made or are they born? No one knows for sure, but successful entrepreneurs tend to share these traits:

Discipline
To be successfully self-employed, you'll need to have the discipline to set work hours, meet deadlines, pursue new clients and avoid tempting distractions like your TV.

Frugality
To prevent yourself from going broke when your business is new or times are slow, you must be willing to cut back - sometimes way back - on your spending. Remaining self-employed has to be a top priority above buying new clothes or other niceties. It's a good idea to be frugal not just in slow months but in the good ones as well to give yourself a well-padded savings account that can tide you over when your business isn't generating income. (For tips on cutting back, read Save Money The Scottish Way.)

Self-Confidence
In order to successfully sell yourself to others, you have to be your own biggest fan. If you don't believe you're one of the best at what you do, no one else will either. Business will rarely just fall into your lap, so you'll need to be willing to promote yourself and ask for work whenever and wherever possible.

Good Communication Skills
Clients won't always make their expectations crystal clear. Rather than guessing what they want, you must not be afraid to ask lots of questions. It's also a good idea to ask for feedback during and after assignments to make sure you're meeting your clients' expectations.

Humility
Few clients will expect you to be perfect, but if you can't fess up and apologize when you make a mistake, you'll get crossed off their lists. (This trait applies to investors too. Read Seven Common Investor Mistakes to learn more.)

Honesty and Integrity
When you're self employed, your reputation is crucial. You don't have the image of a company to fall back on or make up for the occasional bad employee. You are the company and you are the employee; as such, everything you do needs to reflect well on your business.

Superb Record-keeping Skills
It's very important to know when you sent out invoices, when you were paid, who still owes you money, how much money your business has, how much you have made and how much you need to make. Detailed, accurate records are critical to the financial health of your business and are indispensable for tax purposes. (To learn more, read Six Steps To A Better Business Budget.)

Is Buying A Franchise Wise

Many people think that buying a franchise is a sure way to become a millionaire, but in reality, there are a number of reasons why becoming a franchisee isn't all it's cracked up to be. In this article, we'll take a look at some important considerations before you dive head-first into a franchise purchase.

Pesky Start-Up Costs and Royalty Fees
Start-up costs and royalty fees can put a serious damper on a franchisee's take-home pay. For example, when opening a McDonald's, the franchisee must not only pay money toward the location, he or she must also pony up a $45,000 franchise fee for the right to operate the business for a period of 20 years. After 20 years, assuming the company agrees to renew the contract, another $45,000 franchise fee is charged.

The total monetary layout to open a McDonald's franchise can range anywhere from $500,000 to $1.6 million.

The real kicker, however, is the ongoing royalty fee. Here's how it works: Each and every year, franchisees must pay the franchise a fee equivalent to 12.5% of sales. It also means that no matter how successful you are as a business owner and how innovative you are at driving revenue, you'll always have two partners: Uncle Sam and company headquarters.

The unfortunate part is that royalty fees are pretty standard in the franchise world. In fact, Burger King charges its franchisees 4.5% of sales in addition to a $50,000 franchise fee, and Dunkin' Donuts has its franchisees cough up 5.9% of sales each year in addition to a franchise fee that can range anywhere from $40,000 to $80,000, depending upon the location.

Subtract payroll, food costs and taxes - in addition to these royalties - and it's easy to see why life as a franchisee may not be the life of luxury you imagined.

Lofty Raw Material Costs
In order to maintain consistency among their offerings, most franchises insist that their franchisees buy raw materials directly from them or from a supplier with which they have a "special" relationship, meaning that they receive rebates on what the franchisees order. In any case, the prices that they charge for these materials (either the company or the supplier) are often much higher than what the materials would be sold for elsewhere.

In fact, it's not uncommon for some fast-food franchisees to pay 5-10% above prevailing market value for a box of lettuce or tomatoes, or other produce that could easily be bought elsewhere. After all, produce is produce, right? It's fairly consistent from vendor to vendor. The point is that over a year's time, the premium that a franchisee may have to pay for raw materials can equate to big bucks!

Furthermore, if the franchisee does decide to go elsewhere for its raw materials and it violate the initial contract, the franchise has the legal right to terminate the relationship and, theoretically, the franchisee could lose his or her entire investment.

Lack of Financing
Most franchises don't provide financing. This means that the franchisee will probably have to tap his or her savings or obtain some other source of financing (such as a small business loan). In other words, the franchisee is on his or her own!

With that in mind, some franchises, such as Lawn Doctor (which offers lawn and turf treatment services), will finance franchise fees, start-up costs, inventories and equipment to help their franchisees get started. Situations like these are particularly attractive because although franchisees will probably have to put up a portion of their personal assets as collateral for the loan, at least they won't have to zero out their bank accounts or tap retirement funds to set up shop. (To read more about financing, see Should You Take A Loan From Your Plan?, Getting A Loan Without Your Parents and Qualified Plan Loans: Guidelines To Operations.)

Lack of Territory Control
While most franchises will limit the number of stores that they open in a given area because of fears of market saturation and diminishing returns, many franchises will still try to fit as many retail locations into a given area as possible.

That's why it's not uncommon to see five different McDonald's locations within a five- mile area - the corporate head is trying to squeeze every last dollar out of the territory. But the individual franchisee is really the one who suffers. Every time a new location opens within close proximity, their potential market is essentially cut in half!

Lack of Individual Creativity
Franchises demand uniformity. In fact, everything from in-store décor, signage, products offered and the uniforms the employees wear is dictated by the franchise. For a person who likes to be creative this can mean a bleak existence.

Unfortunately almost every (if not all) franchise has similar requirements. So, if you like to be your own boss, a franchise is probably not for you.

Franchise May Not Know Your Area
You've probably heard many times that "location, location, location" is the most important factor in determining the success or failure of any business.

The point is that unless the franchise sets up shop in a favorable location that's going to support the business, the franchisee will have an incredibly difficult time making ends meet.

Take the Pizza Hut that's located about five miles from my home as an example. Now I'm sure that the folks who compiled the demographics on the area and secured the location for the franchisee thought it would work out fine. After all, the town is chock full of people and in close proximity to a major highway.



But what headquarters probably failed to uncover was that the location is also virtually surrounded by adult communities. In other words, people who usually aren't too keen on eating pizza or dining out with any frequency. In addition, a few miles up the road where the younger (pizza eating) crowd is located, there are four or five mom-and-pop pizzerias that provide stiff competition.

Therefore, although franchises may be able to do a quick demographic study and gauge whether there is a good chance that a location will fare well, they rarely know an area as well as the locals.

Handle A Home-Based Business

Outline the mission statement, which should detail exactly why you are in business. Beyond that, write down the goals for the business, how you will meet the goals, who will be responsible for them and when they will be realized.

Evaluate the cost of the service or product in the outline. For instance, determine the costs of all materials found in the product, labor costs for creating the product and the cost for indirect materials and labor, such as supplies and clerical services. Figure out the cash flow by starting with the purchase of the inventory and following through to how payment is collected.

he business plan should also address the following points:

• who the customers are and their needs
• your knowledge of the business
• your qualifications
• pricing models
• how the finances are managed
• projections for the future
• how it is different from the competition

Financing and Legal Setup
Identify the amount of startup funds and the type of financing you will need and their source. Prepare to invest 20-50% of your own money into the business and know that the average startup costs are $10,000 and upward.

It's important to understand and follow federal, state and local government rules. Papers must be filed if you incorporate, or want to protect the name of the business. Go to your town office or city hall if licenses and permits are needed to operate the business. The local code-enforcement officer can let you know whether you comply with zoning restrictions.

Register for an Employer Identification Number if you plan to incorporate or if your partnership or proprietorship has employees. The business area or home office must be part of the home and used on a regular and exclusive basis in order to qualify for a tax deduction from the IRS. Don't assume your home insurance will cover your home-business activities. Find out how the business will affect your policy and get any extra policies that will help protect you against losses.

Think Professionally
Create a business environment that maintains professionalism and allows you to function well. Analyze the space you will need for the office, production, tools and equipment, clientele and pick-up and delivery. Consider the location, traffic and parking.

The following are some important items you may need to include:

• a home computer
• an address or post office box
• a separate telephone line
• voice mail
• a fax machine
• company letterhead
• a separate bank account

Nearly three out of four businesses are in operation after two years, so this means you'll have to find ways to adapt as the business expands. It's possible to keep the business at home by adding another room to your house or buying a new one, but prepare yourself in the event that growth requires you to move the business out and rent office space.

Conclusion
Deciding to start your own business from home is obviously a big step, but with the right forethought and preparation it can be a rewarding experience, both professionally and personally.

A critical component of a successful business is the budget. Read Six Steps To A Better Business Budget to learn more.

Can You Handle A Home-Based Business

Think you can handle your own home-based business? Certain personality traits could help you succeed. Starting a business is a big responsibility that includes commitment, professionalism and self-discipline. It involves careful consideration, such as what type of competition you'll encounter, the demand for and quality of the service or product you'll provide and the management of cash flow. Read on to find out how a swift launch and expedited growth can occur as long as you weigh the pros and cons of developing a business, create a solid business and financial plan and understand and abide by local and federal laws and guidelines

Find Your Inner Drive
When it comes to starting your own business, examining your abilities before you act can save you from disappointment and wasted time in the long run. For instance, ask yourself whether you can set goals and stick with the plan. Once the goals are set, do you think you can accomplish what you've planned? Setbacks will occur; do you think you can remain optimistic?

Most entrepreneurs often demonstrate characteristics that include confidence, risk-taking, creativity, drive and determination, but the following personality traits can directly impact your business as well.

• Passion for the business will make you a hard worker.
• Ethical principles, such as wanting to provide a useful business to your community and to have the respect of your peers, can give your business a positive image.
• Persistence is needed to stay on top of events taking place within the business. Trade associations and subscriptions to magazines focused on your business can help.
• Socializing will help your business grow because it gets the word out about your company and creates relationships for its benefit.
• Organization is another attribute that aids growth.

Points to Consider
Determine whether this is the right choice before you take on the challenge by considering the pros and cons. Some potential pros and cons of a home-based business are as follows.

Pros

• You can stay at home (no commuting).
• You may dress casually.
• You can set your own work hours.
• You are your own boss.
• You would have more tax benefits and write-offs, such as claiming depreciation for your home office.

Cons

• The town or city you reside in will want to maintain a positive character and quality, which will mean your activities and future growth potential may be limited.
• You may face zoning restrictions.
• You may face prohibition of the production and sale of certain goods.
• Most likely you will need to invest many hours to set up the business; this may infringe on your personal and family life.
• The Internal Revenue Service (IRS) may have a bunch of questions for you to answer, as this federal watchdog keeps a close eye on home-based businesses. (Read more about the advantages and drawbacks of working for yourself in Be Your Own Boss By Freelancing.)

Resources to Consider
Forging ahead and starting the business may require you to enlist the help of a local attorney and an accountant, but free information and assistance are also available from your local Small Business Development Center (SBDC) and SCORE offices. Both are associated with the U.S. Small Business Administration (SBA). The IRS can even provide free assistance, which would include accounting and recordkeeping, through the Small Business Tax Education Program.

Six Steps For Better Business

After you've researched this information, you should then match the business's revenue with expenses. The goal is to figure out what an average weekly expense for overhead, utilities, labor, raw materials, etc. would look like. Based on this information, business owners may then be able to estimate or forecast whether they'll have enough extra money to expand their business, or to tuck away some money into savings. On the flip side, owners may realize that in order to have three employees instead of two, the business will have to generate more in revenue each week.

Let's look at six tips that will help you plan your small business budgets.


Tip No.1: Check Industry Standards
Not all businesses are alike, but there are similarities. Therefore, do some homework and peruse the local library for information about the industry, speak with local business owners, and check the IRS website to get an idea of what percentage of the revenue coming in will likely be allocated toward cost groupings.

Small businesses can be extremely volatile as they can be more susceptible to industry downturns than larger, more diversified competitors, so you only need to look for an average here, not specifics.


Tip No.2: Make a Spreadsheet
Prior to buying or opening a business, construct a spreadsheet to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs. It's a good idea to contact any suppliers you'd have to work with before you continue on. Do the same thing for rent, taxes, insurance(s), etc.

Tip No.3: Factor In Some Slack
Remember that although you may estimate that the business will generate a certain rate of revenue growth going forward or that certain expenses will be fixed or can be controlled, these are estimates and not set in stone. Because of this, it's wise to factor in some slack and make sure that you have more than enough money socked away or coming in before expanding the business or taking on new employees.


Tip No.4: Look To Cut Costs
If times are tight and money must be found somewhere in order to pay a crucial bill, advertise, or otherwise capitalize on an opportunity, consider cost cutting. Specifically, take a look at items that can be controlled to a large degree. Another tip is to wait to make purchases until the start of a new billing cycle, or to take full advantage of payment terms offered by suppliers and any creditors. Some thoughtful maneuvering here could provide the business owner with much needed breathing and expansion room. (To get venture capitalists to invest much-need capital into your company, see Fly High With Angel Investors.)


Tip No.5: Review the Business Periodically
While many firms draft a budget yearly, small business owners should do so more often. In fact, many small business owners find themselves planning just a month or two ahead because business can be quite volatile and unexpected expenses can throw off revenue assumptions.


Tip No.6: Shop Around for Services/Suppliers
Don't be afraid to shop around for new suppliers or to save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets, and during periodic business reviews.

Six Steps To A Better Business Budget

You've just purchased or opened a small business and you know your trade, but when it comes to bookkeeping and, more specifically, budgeting, your skill set is lacking. It's OK - the good news is that it is possible to come up with a budget, or at least a good estimation of what will be needed in terms of dollars and cents. Read on for six simple tips that will help you put together a top-notch small business budget.(To read about large corporations' budgets, check out How Budgeting Works For Companies.)


Why Budgeting Is Important
Estimating and matching expenses to revenue (real or anticipated) is important because it helps small business owners to determine whether they have enough money to fund operations, expand the business and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in or, conversely, not spending enough money to grow the business and compete. (If you haven't set up your own personal budget yet, read The Beauty Of Budgeting and our Budgeting 101 special feature.)


Budgeting Techniques
Every business owner tends to have a slightly different process, situation, or way of budgeting. However, there are some parameters found in nearly every budget that you can easily employ. For example, many business owners must make rent or mortgage payments. They also have utility bills, payroll expenses, cost of goods sold expenses (raw materials), interest and tax payments. The point is that every business owner should consider these items and any other costs specifically associated with his or her business when setting up shop or when taking over an existing business. (For related reading on owning a business, see Why Owners Sell A Business and Is Buying A Franchise Wise?)


What To Do with Revenue
With a business that is already up and running, you can make assumptions of future revenue based on recent trends in the business. If the business is a startup, you'll have to make assumptions based on your geographic area, hours of operation and by researching other local businesses. Small business owners can often get a sense of what to expect by visiting other local businesses that are for sale and asking questions about weekly revenue and traffic patterns.

4 Steps To A Great Business Plan

A business plan serves two purposes:

• It provides a road map for your business.
• It helps you obtain outside financing.

If you're going into business for yourself, you must have a business plan - period. Numerous studies have shown that one of the major reasons new businesses fail is poor planning.

• Are you an entrepreneur?
• Start your own small business

The good news is that developing a business plan is not as hard as it seems. In order to develop a solid business plan, you need to have a thorough understanding of the business you're entering. Next, you need to determine how you'll use the plan and who your target audience is. Finally, you should create a complete a business plan that is comprehensive and concisely written. We'll explore each of these steps in detail.

Step 1: Know your business
In order to prepare a business plan, you must know the business you are entering inside and out. This means lots of research. Research comes in two forms: reading everything you can about the industry and talking to those who are already in it. Learn everything you can about your business and industry.

Step 2: Determine your purposes for the plan
A business plan serves to crystallize your business vision and guide you in fulfilling that vision; it is also frequently used to entice potential investors.

• 6 steps to a better business budget
• Can you handle a home-based business?

If you are self-financing your business, you design the plan mostly for your benefit, but if you're seeking outside investors, you'll need to target them. As such, before you create your plan, determine whether you will solicit outside investors.

Step 3: Determine your audience
If you plan to recruit investors, you need to build a plan to suit them. Outside investors, who range from friends and family members to banks and venture capitalists, will invest through either loaning you the money, buying shares in your company or some combination of the two. Determine their level of sophistication and what they are looking for in a potential business investment. Remember that regardless of their level of sophistication, they are all looking for four things:

Trust in you - You build trust by demonstrating ethics and integrity, so your business plan should demonstrate those qualities.

• Is buying a franchise wise?

Understanding of the business - It is your job to clearly articulate your mission statement, your product offerings and how you will make money. Your may have to tailor your plan to suit your audience: less-sophisticated investors may be scared off by industry jargon, while investment professionals will probably expect it.

Financial confidence - Clearly articulate the risks of investing in your business. Also, show investors how they can recoup their money - whether your venture succeeds or fails.

A good return on investment - Over the period of 1928-2007, the geometric (exponential) return for stocks was 9.8 per cent, while for 10-year Treasury bonds, it was 5 per cent. Historical private-equity returns are more difficult to measure, but, in general, investors will expect a premium of anywhere from 2-5 per cent over public-equity market returns. The return on equity for your new business must be in the private-equity range.

Typically, investors will look to beat a certain internal rate of return. Your job is to make sure your projected returns are in line with those of similar industries.

Step 4: Create your business plan
First, develop an outline of your business plan. Consider every aspect of your business and how it will affect your business plan. Remember, this business plan is a road map. It must guide you. It must also communicate to investors what you're doing and why they should invest with you.

The order in which your plan is presented should be something like the following:

• Mission Statement
• Executive Summary
• Product or Service Offerings
• Target Market
• Marketing Plan
• Industry and Competitive Analysis
• Pro-Forma Financials
• Resumes of the Company Principals
• Your Offering (what type of financing you're seeking)
• Appendix (any other pertinent information)

You'll probably also want to note any personal seed capital you're investing in the venture. Financiers want (and often require) entrepreneurs to put their own funds in the venture, and the greater the portion you invest relative to your net worth, the better.

Now let's review each section of the business plan in detail.

Mission statement
The mission statement is a concise, one- to three-paragraph description of your business objectives, or your business's guiding principles. In this section, you should state your unique selling point, or what separates your company from all the others in the industry that are otherwise just like it.

Executive summary
This is a one- to two-page summary of your business. Potential investors will read this to decide whether they want to look at the rest of your plan.

Product or service offering
Create a section describing your product or service offerings in detail, as well as how much you'll charge for what you're selling.

Target market
Present your primary and secondary target markets, along with any research that demonstrates how your target market will benefit from and consequently purchase what you're offering.

Marketing plan
Present your marketing plan, which should show in detail how you'll reach your target market. This part of the plan will include advertising and promotional strategies.

Industry and competitive analysis
Include a complete and thorough industry and competitive analysis that includes all stakeholders in your business. Don't forget to include governmental and regulatory agencies.

Financial statements
These must be complete, accurate and thorough. Each number on your spreadsheets must mean something. Don't estimate payroll, for instance; determine what it will actually be. Your income statement must reconcile to your cash flow statement, which reconciles to your balance sheet. Your balance sheet must balance at the end of every period. You must have supporting schedules (e.g., depreciation and amortisation schedules) to back up your projections.

If you are having trouble building your pro-forma financial models, which should project out for at least five years, seek outside help from a qualified professional.

Use realistic projections. In estimating the growth of your business, you will make certain assumptions, which should be based on thorough industry research combined with a strategy for how you'll compete. Also, analyze how quickly you'll achieve positive cash flow. Investors vary in their standards, but most like to see positive cash flow within the first year of operation, particularly if this if your first venture.

In order for your projections to be accurate, you must know your business. If you've built an accurate and realistic model, but still project negative cash flow for more than 12 months, rethink your business model.

Resumes of company principals
Include the bios and professional backgrounds of all significant employees of your business. You will want to emphasize how their backgrounds have prepared them to take on the challenge of running your new startup. Also, if an employee's business background is in a significantly different industry, you might want to emphasize how this can be an advantage instead of a detriment.

Your offering
Present what level of investment you're seeking and for what purposes you will use the funds. If you're selling business units, state the individual price per unit.

Once you've put together all of this key information, make sure to present your plan professionally. It should be typed, margin aligned and neatly bound. Use color graphics and pictures where possible. Do not handwrite changes or corrections. The inside of your business plan should be near book or magazine quality.

After you've finished your plan, have a professional you trust, such as a Certified Public Accountant or attorney, look it over. This person may catch details, errors or omissions you've made. They also will be able to give you a more objective opinion of the viability of your business.

Building your business plan is just the first step
Once you've completed your plan, you'll submit it to potential investors, who may ultimately commit to financing. Once you receive those commitments, you'll negotiate terms and then, finally, open your doors for business, which is where theory ends and the real work begins.