Why is A Sound Business Plan Important?

Startup Company partners

Every business can benefit from having a sound business plan, for startup companies, having a sound business plan is an absolute necessity. Investors and potential business partners will want to see a solid business plan in place before considering, let alone committing to a financing investment. The business plan should demonstrate the vision of the startup and persuade investors to commit financing to make that dream a reality. Entrepreneurs must thoroughly and persuasively draft a business plan. Working with a Silicon Valley business law firm greatly increases the validity of the business plan and their corporate attorneys can help the entrepreneur understand the different factors that that must come together to form the business plan.

Drafting a business plan can be a daunting task for some entrepreneurs. The notion of essentially reducing the vision for a company, not even in existence, to words on a paper is difficult to comprehend. Many, many variables present themselves when a business is in the startup phase: markets, price points, the cost of raw materials, evolving technology, and escalating labor costs are all relatively unknowable when drafting a business plan. The business plan must successfully make those variables as concrete or as certain as possible.

The contents of a business plan are fairly uniform. Bearing in mind the audience of the business plan, the entrepreneur must lay out in great detail what the business will do. The business plan should expound upon the notion that this particular good or service is a game changer. In other words, the business plan must prove to the reader that the good or service offered is innovative, revolutionary, or improves upon an existing good or service. The business plan should also spell out plans for growth and development, as well as the customer base or markets which will buy the good or service offered by the startup. The business plan should include the structure of the organization, as well as plans to formalize such as incorporation or perhaps an intention to grow from a closely-held corporation to a publicly traded corporation.

The potential investors reading the business plan will be skeptical. They will demand evidence of the claims made and, most significantly, potential investors will want to know when they can get their money back. The business plan must convince the potential investors that the idea is profitable and give a timeline, based on solid market research, of when the company expects to turn a profit. Therefore, the business plan should be drafted with an eye toward educating the reader on existing markets, the potential for expansion, the limitation on growth potential, and market demand. Also, the entrepreneur should identify the competition, if any, for market share, and prove to the potential investors that the good or service will thrive in a heavily competitive market. The entrepreneur must also include empirical evidence based on the solid market research in the business plan. Empirical evidence will convince a potential investor the startup is worth the financial risk.

In addition, the business plan should include a discussion about the people who run the company.  Investors, as well as potential executive or director level employees, need to know who is at the top, their pedigrees, and their previous business successes. The entrepreneur can use this section of the business plan to convince the reader that they are the right person, at the right time, to lead this new company. The reader should be left with no question that the current management structure can appropriately manage the company and help it grow.

Silicon Valley Startup Attorneys Help New Businesses Grow

Consult with the skilled business lawyers from Startup Company Counsel if you are considering commencing a startup company. Their experienced Silicon Valley startup attorneys will guide you step-by-step through the process of starting your company and help you write a solid business plan. Call Startup Company Counsel today at 408-441-7555 or email us to start your business endeavor.

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