What is the best type of business plan for your business startup?

To continue the discussion from yesterday about financing your business startup, I asked David Gass, Founder and President of Business Credit Services, Inc., about business plans. Here's what he said,

I believe every business needs a business plan when they start out. Strictly speaking, a business plan isn't needed for tiers 1, 2, and 3. It's only when you get into investors, venture capital, that a business plan is really needed to show to these potential investors. Even more important than a business plan is an action plan to implement the business plan. The business owner needs to take steps to implement the action plan, weekly, monthly.

Some more of David's insights into financing your startup:

Q: As we talked about yesterday, if new business owners should be using trade credit to finance their startups, what should they use bank financing for?

A: The bank financing should be used for leverage – to generate revenue and grow the business. It should not be used to buy office furniture. Leverage your bank financing to buy things that will generate a return on investment, like capital improvements.

Q: What about paying yourself? Can you use the bank financing for living expenses?

A: No, that money should be spent, as I said, in growing the business. You may not be able to pay yourself for up to 18 months, so you need either another source of income or a lot of personal savings. The reality is that when you start a company, the money must be spent to generate revenue.

Tomorrow, David's advice on borrowing from family and friends.