How to create a plan for better business
Write a solid business plan to secure vital investment
You wouldn’t start out on a cross-country road trip without a map, so why would you want to try to start a business without a business plan?
A business plan precisely defines your business, identifies your goals, and serves as your firm’s resume. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. One of the greatest benefits is that putting a plan together forces you to sit down and map out exactly how you expect to make your business idea successful. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don’t have enough time. But just as a builder won’t begin construction without a blueprint, eager business owners shouldn’t rush into new ventures without a business plan.
There are four core questions to answer before you begin writing your business plan:
- What service or product does your business provide and what needs does it fill?
- Who are the potential customers for your product or service and why will they purchase it from you?
- How will you reach your potential customers?
- Where will you get the financial resources to start your business?
Although there is no single formula for developing a business plan, some elements are common to all business plans. Your plan should start with a cover sheet, a statement of your business purpose and a table of contents. Then start with a section about your business idea: describe your business, tell how you plan to market it, review your competition, describe the operating procedures you plan to adhere to, discuss your plans for employees, and how you plan to hire and train them, and describe your approach to insuring the business.
Next, you’ll want to provide detailed financial data, including any loan applications you will file, a list of the equipment and supplies you will need and how much they will cost, a balance sheet showing your assets and liabilities, an analysis of what it will take for you to break even, and a projection of your business’ income, including anticipated profits and losses.
Your financial data should also be organized in a three-year summary, with detailed projections of cash flow, costs and income, organized month-by-month for the first year and quarter-by-quarter for the second and third years. Be sure to include a discussion of the assumptions on which your projections are based.
You should also have an executive summary in which you summarize the plan, and be prepared to attach supporting documents and financial projections. The supporting documents should include resumes and tax returns of the principal owners for the previous three years, a copy of a franchise agreement if your business is a franchise, copies of proposed leases or purchase agreements for business space, copies of licenses and other legal documents, and copies of letters of intent from suppliers and known customers.
You can find a wealth of resources for producing a solid business plan in the Write Your Business Plan section of www.SBA.gov. There you can access on-demand videos, expert blogs, and a Step-by-Step Business Plan Builder tool for you to create a draft business plan that you can take to any SBA resource partners for counseling and support.
Nadine D. Boone is lead business opportunity specialist at the Massachusetts District Office of the U.S. Small Business Administration.