Preparing a sound, bootstrap business financial plan is the absolute key ingredient for any budding entrepreneur starting a small business with bootstrap financing. Unlike a traditional business plan, a financial plan for a bootstrapped business contains six essential components.
Components of a Successful Bootstrap Finance Plan
1. Expense Summary
The expense summary contains the start-up costs and ongoing operating expenses needed to get your business up and running.
2. Projected Profit & Loss Summary
Your profit and loss summary is a key tool for determining how long it will take your business to become profitable. It reflects a very simple formula of: revenues minus expenses, equals profit or loss.
3. Sales Forecast Summary
Your sales forecast summary is an estimation of what you believe your sales are likely to be each month. Sales forecasting requires research and a solid knowledge of your industry, niche market and product or service.
Starting a small business with bootstrap financing requires laser targeted forecasting. This is not as difficult as it sounds, it just means you must really invest the time in thoroughly researching your business.
4. Reserve Funding Plan
Establishing a reserve funding plan is essential for weathering the "start-up storms". This is a back up funding plan for keeping your cash flows above dangerous levels. Your bootstrap business financial plan must include a reserve funding plan, in order for your new venture to be successful.
5. Cash Flow Management Plan
This is simply the anticipated inflow (sales) and outflow (expenses) of cash through your business by month. Why it's so tricky is due to the fact that you may have slow sales or no sales when you're just getting started. Or, perhaps your customers are not paying within terms. Even if you have great sales on paper, your cash flow management plan will determine your success to a large degree.
6. Balance Sheet
A balance sheet provides a good overall picture of what your business is actually worth. It takes your assets (physical goods like equipment or property) minus your liabilities (debts owed to creditors) and gives you the equity value of your business.
What makes these components different from what you would prepare for a business plan written for bank financing? Well, the main difference is that this plan is just for you. It is an actual plan that you must follow to achieve success in your business. I have seen far too many instances where a traditional business plan is almost completely ignored, once the bank loan check is cashed.
With over one third of brand new businesses failing in their first year of operation, you owe it to yourself to minimize your start up risk, by being well prepared with a sound financial plan.
Where Does a Bootstrapped Business Plan Fit In?
Where does a bootstrap business financial plan fit in? Well, first you must understand bootstrap financing. Starting a small business without borrowing is the ultimate goal of a bootstrapped business' financing strategy. Many new entrepreneurs just don't realize that you can start up a business, even if you have very little money, poor credit or don't own a home. How is this possible? I know that I'm going against conventional wisdom here, but you really can start up a brand new business without BIG bank loans or a stockpile of cash.
Find the free sources of business start up funding your new business needs to survive and thrive. Start by claiming your free copy of The Bootstrapper's Business Start-up Planner, by visiting my website.
©2009 Kimberly Kelly - All Rights Reserved Worldwide.
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