A first-rate business plan is a Rosetta stone, a measuring stick that you, as a business owner, can use to gauge your company’s progress and help make adjustments for continued growth. But more importantly, especially when it comes time to secure a loan, a business plan is a sales pitch.
Business owners/entrepreneurs must do their homework and take notice of some of the professional dos and don’ts of writing a business plan. Before sitting down to write your plan, consider these suggestions from local bankers.
The Basic Components of a Business Plan
There are several prerequisite items concerning the business you’re going to need on hand. A business plan defines your business, identifies your goals, and serves as your roadmap to effectively manage your business. The basic components of a business plan include a current and Pro-forma balance sheet, an income statement, and cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make effective business decisions.
Some other basics include relevant marketing information as it relates to the business, industry competition, operating procedures, personnel, and business insurance information.
In addition, banks would like to see capital equipment and supply list, breakdown analysis and income projections. Banks also like to see a 3-year summary detailed by month beginning with the first year and detailed by quarter the second and third years.
Find Your Niche
Demonstrate how your business will compete within your industry’s market. The owner needs to spend some meaningful time developing the plan and making sure it adequately details opportunities and niches in the marketplace. This is an excellent way to reflect that you’ve thought through both the strengths and the possible weaknesses of the business concept.
Do Your Research
Showing up to the table unprepared will leave you hard-pressed to keep your seat. Those who really want to impress bankers will demonstrate their competence as a business owner with well-prepared financial projections that don’t ignore issues such as the owners’ salary and allowances for expenses in terms of the loan interest. That’s the hardest piece for the bankers to measure. And it’s crucial in terms of whether the individual has the tools to successfully get a business off the ground and run it.
Realistic Financial Projections
A frequent mistake borrowers make is providing projections that are “pie in the sky” and simply not believable.
Bankers look for a well-thought-out plan with realistic financial projections. Particularly, the ability to repay any obligations through the cash flow of the business. The development of a comprehensive plan shows whether or not a business has the potential to make a profit. It requires a realistic view of every aspect of the business and shows that you have thought through the operations, marketing, and financing of the business.
Concentrate On Content, Not Length
The length of a business plan will vary. As long as the plan contains the following elements, the business owner will have prepared a solid foundation: description of the business, marketing, finances, and management.
The Plan Won’t Sell Itself
Just because your business plan is complete doesn’t mean your work is done. When meeting with a banker, you need to come prepared to sell the plan yourself. Also, it may be necessary to meet with a number of banks to find a willing partner.
Get Some Help
Entrepreneurs are notorious for shouldering every responsibility when it comes to their business. If this is your first plan, do yourself a favor and shelf the do-it-yourself mentality for a few minutes and enlist some professional assistance. Start by asking your banker or Attorneys or CPAs or Business Consultants.
Don’t Underestimate The Power
A business plan is a powerful document. Treat it as such. Because a business plan provides specific and organized information about your financial projections and how you will repay borrowed money, it is a crucial part of any loan request. The importance of a comprehensive, thoughtful business plan cannot be overemphasized. It is used to gain outside funding from banks and investors, credit from suppliers, managing the finances of your business, and achievement of your goals and objectives.