A well-prepared business plan is more than a necessary tool to seek funding. It should also be a functional road map for your growth strategyI WHAT TO EXPECT For any business to be successful, it must be started and operated with a clear understanding of its customers, its internal strengths, its competitive environment, and a vision of how it will evolve to compete in the future. A business also needs money to start, to operate, and to grow. By expending the effort to develop a comprehensive business plan, you will have a powerful tool for attracting investors. Your business plan is the roadmap for your company. It clearly states where you are, how you got there, and how you plan to proceed. This Business Builder steps you through the process of developing a comprehensive business plan. Although businesses may vary with regard to the products or services they offer, there are specific elements that a potential investor will look for in any business plan. Therefore, every well thought-out business plan includes a description of products and services, a competitive analysis, a marketing plan, a management plan, and a financial plan. Your business plan will provide you — and potential investors or lenders — with a clear understanding of your objectives, strategies, and financial viability. WHAT YOU SHOULD KNOW BEFORE GETTING STARTED [top] Why Write a Business Plan? Business plans are prepared as a necessary instrument for raising capital from potential investors, bankers and other lenders. It is an essential document when taking your business public or selling all or part of a company. In fact, without one, soliciting a bank for funds is pointless. To lenders or potential investors, it not only provides information and reveals an evaluation of your venture's feasibility, but also reflects your management abilities. An analytical, objective business plan convinces lenders that you are capable, organized and prepared. One that is poorly researched, or makes unsupported assumptions shows that you are inexperienced and in their eyes…reckless. Lenders receive an enormous number of proposals and usually don't spend much time with them. That means your plan has only a few minutes to make a good impression, and must stand alone as an initial sales tool. Do the best job you can, and let it favorably represent you as the capable, competent business owner that you are. Preparing a business plan will take time, but it is well worth your investment in the long run. Not only will this document provide valuable information to outside investors and lenders, it will lay out the game plan from which to operate your firm. This is, by far, the most important use for your business plan. It will become your blueprint and direct you towards achieving your overall business goals. A typical entrepreneur has a good business idea but is rarely qualified in all areas of running a business. Good business plans are comprehensive, well thought-out documents that provide the basis for entrepreneurs to make sound business decisions. Whatever the intended use of your business plan, make sure it's thorough, accurate, and backs up all your claims with facts. Tips For Creating a Good Business Plan The following are some pointers to consider before creating your business plan:
Who Should Write Your Business Plan? The only right answer is — YOU! You may be persuaded by professional advisors that you need their services or maybe the software they peddle to produce an effective business plan. However, the truth is you will be doing most of the work with or without their help. A business plan is 75% research and 25% format. They can help you with your format, putting your information into a readable plan, but you will have to provide the research that makes up the bulk of the plan. The same is true with this Business Builder — it'll show you what needs to go into a comprehensive business plan and how the plan should be organized for maximum readability, but you will need to do the majority of the work. It's a lot of work to be sure, but is an important investment towards your business success. What Lenders Look For Following are some key questions that investors and lenders will be looking to answer. Keep them in mind when writing your business plan.
Following, you will find a thorough discussion on what can be included in a business plan, but understand ALL OF THIS INFORMATION DOES NOT NEED TO BE IN YOUR PLAN. What goes into your plan depends upon your specific business and the information required by your lenders and investors. If you can, you may want to check with your lender or potential investors beforehand to determine their specific requirements. PROCESS FOR DEVELOPING YOUR BUSINESS PLAN [top] This section presents the steps for developing your business plan. This is the basic information that you will be required to provide to lenders and investors and is the minimum you'll need to operate your business effectively. Read each step, and complete the tasks outlined in each. Then, depending upon the nature of your business, you may want to add further information that may prove valuable to potential investors and lenders. Where possible, examples will be included to provide you with further clarification on what you should supply. Following is a ten step process you can use to develop your business plan.
These steps are presented in a logical order for discussion. Use your judgment on how you work through the process. You may be able to perform many of the steps simultaneously. Use the checklists provided in each step to ensure that your information is complete. Begin The Plan With a Summary Most investors and lenders are inundated with potential opportunities, so provide a focused and brief summary — about one or two pages in length. Your summary will give them a first impression of whether your business is worth further scrutiny. A business plan is unique to your company and, accordingly, the approach used and structure of plans vary considerably. Regardless of form, however, certain basic questions should be addressed considering your plan. They are:
Describe Your Company — Its Business, Goals And Objectives It is critical that you present a thorough picture of your company — a description of your business with your key goals and objectives.
Analyze Your Market And Determine Your Marketing Strategy It is critical that you understand your market. A good product is not enough to guarantee marketing success. For example, you may make the best buggy whips in the world, but this doesn't matter if there aren't customers to buy your product. This is one of the most important sections of your business plan. It will be scrutinized carefully, therefore, your market analysis should be as specific as possible, focusing on believable, reliable, achievable projections. You may want to refer to the following training Business Builders to help you with this step: How to Prepare a Market Analysis You may want to introduce this section with a one page summary highlighting the key elements of your marketing plan. Follow your summary with the information that will support this page. Finally, include additional information and evidence that you feel is necessary in the appendix.
Describe Your Products/Services And How They Are Produced Describe your product/service in layman's terms. Explain any niche you may have. Discuss your competitive advantage — why people will choose your product over your competitors', the benefits of your product/service, and how you will sustain your edge.
Describe Your Management Organization Describe your business structure. Also, include a discussion of your management team in this section. List officers and/or principal owner/managers, and detail your management team's responsibilities and qualifications. Referring to the Business Builder How to Determine the Legal Structure of Your Business may help you with this step. Make sure you include:
Describe Your Operations Describe how you plan to operate your business. Go into detail about location, facilities, equipment, raw materials and suppliers, workforce, hours of operation, and methods of recordkeeping. Make sure you include:
Develop Your Financial Forecast Most forms of business financing require forecasts. These forecasts serve to demonstrate not only the need for funds but also the potential future value of equity investments or debt repayment. Developing the proper financial forecasts is, therefore, a critical factor in obtaining capital for your business. It may be the most crucial task in determining the viability of your business. You will need to:
Referring to the following training Business Builders may help you with this step: How to Prepare a Cash Budget Be sure to include: |