Writing a business plan

Now that you’ve come up with your idea it’s time to move onto the next step: writing a business plan.  A company’s business plan is what lenders use in deciding whether or not to loan you the money needed to start up your new venture.  It is the most important document you will use to gauge your company’s success and help you make decisions about how to move forward with your new undertaking.  (“If you’re starting a home-based business some of these suggestions may not apply but you should still create a plan that outlines your goals, expected costs, marketing plan and exit strategy.  A business plan is your road map for how you expect to succeed and how you’ll measure success.”)

A great business plan is a living blueprint for your business that can help you manage your company while helping potential investors, partners and lenders understand your business strategy and chances of success.  “A business plan is never quite finished because you’re always revisiting it, reviewing it and building upon it.”  Writing a business plan can help you describe your product, service and marketing plan as well as your sales forecasts.

Show your investors how they’re going to make money.  A business plan is a must if outside lenders are sought whether from banks, small business loans or venture capitalists.  It is one of the primary documents a loan officer will want to take a look at.  If you're developing a plan involving a business loan, then your lenders are going to want something slightly different.  “They will want to see a section detailing collateral or assets to pledge against the loan.  Collateral includes funds to support loan payments, interest expenses, and debt repayment.  Banks aren't allowed to make speculative loans, so you need to include information in your plan to make the banker feel safe.”

What components should a plan include?  For starters, a description of the company and products and service offered.  Additionally, a plan should incorporate financial forecasts and analysis and a description of your management team.  Your plan should also include an executive summary: an abstract of your plan and what you will say in greater detail in the coming pages.  It outlines the goals of your business.  It may be wise to review sample business plans in lieu of starting your own.  “Be sure to include background about your company, the market opportunity, your capital requirements, a mission statement, an overview of management, competitors, your business's competitive advantages, and a summary of your financial projections over the next three years.”  A plan should also include a company overview used to provide additional information about your new venture: it’s mission, model, strategy and why it is being formed.

Additionally, in your business plan you should include all the operating costs of your business, such as where the company will take office space and for what approximate cost per year, etc.  Bear in mind that your business liabilities can work against you getting the loans you need and want.  Signing a long term lease for office space for example can be a hindrance.  The investors will see a long term lease as a red flag - if the business fails their money is committed to several years of rent.  Consider including the plan to lease space from an "executive suite space" also known as Office Business Centers.  Options such as Emerge212 (http://www.emerge212.com/) provide your business the impressive space it needs to thrive and grow with the shorter term leases that will look more favorable to investors.

Most importantly, investors need to know that your business plan was created by you and not an Internet company that offers to sell business plans on the cheap.  Each business plan should be as unique as the business you are starting.  “A business owner should also be fully invested and fully aware of every aspect of the plan.”  The text used should be a simple and easy to read font with a table of contents and topic headers.  Including charts where appropriate is also a good idea.  Most experts conclude that a plan should not be more than 30 to 40 pages not counting supporting documents.

What are some of the types of business plans?  The most regularly used is a start-up plan covering standard topics about the company, products and services offered, implementation, management team and financial analysis.  Another type of plan is the internal plan which is not intended for outside investors.  There is also the operational plan or annual plan using milestones, dates and deadlines.  The strategic plan focuses more on high-level priorities than on detailed dates and specific responsibilities.  The growth or expansion plan is focused on a subset of the business.  Lastly, a feasibility plan is similar to a start-up plan that is simpler – focusing on mission statement, keys to success, basic market analysis and preliminary analysis of pricing and expenses.

I hope this blog entry has been helpful in making you understand the tools needed to create a sound business plan and the steps needed to make that happen.  Please log on next Wednesday where I will discuss securing funding.

Until next time…