You will be expected to have a sound business plan if you are applying for a business loan or asking venture capitalists to invest in your company. They will be keen to see your sales forecasts and cost estimates, to consider the true profitability of your business. Planning for future success. Your business plan isn't a fixed entity. Hire an accountant to write a pro forma statement, which is a projection of future expenses and earnings and are typically attached to a business plan when applying for a commercial loan. How to Write a Business Plan to Support your SBA Loan Application. A key requirement for any business loan application is a business plan. Not only does it demonstrate that you have a clear roadmap for growth, backed by research, financial data, and product strategy, it will also ensure that your lender matches you to the right loan program, based on your needs, goals, and financial projections. And if you need a business plan for a bank loan, getting this document right is absolutely essential. So here's what we recommend: simplify the planning process by breaking the work up into manageable, bite–sized steps. That way, you can focus on one section at a time to make sure it's accurate. The act of applying for a small business loan can be intimidating. You are excited about the prospect of obtaining a loan to grow your business, but at the same time, you are worried about making a mistake that could have a negative impact on your finances. Learning more about a small business loan does not mean you have to apply.
This is the core of your business plan. It should give loan officers a clear understanding of:
There are three key parts to this step:
Detail exactly what problem you are solving for your customers. How do their lives improve after you solve that “pain point” for them?
We recommend actually going out and chatting with your target audience first. That way, you can validate that you're solving a real problem for your potential customers.
Be sure to describe your solution in vivid detail. For example, if the problem is that parking downtown is expensive and hard to find, your solution might be a bike rental service with designated pickup and dropoff locations.
Who exactly are you selling to? And roughly how many of them are there?
This is crucial information for determining whether or not your business will succeed long–term. Never assume that your target market is “everyone.”
For example, it would be easy for a barber shop to target everyone who needs a haircut. But most likely, it will need to focus on a specific market segment to reach its full business potential. This might include catering to children and families, seniors or business professionals.
Who are your direct competitors? These are companies that provide similar solutions that aim to solve your customers' pain points.
Text editor for python mac 2016. Then outline what your competitive advantages are. Why should your target market choose you over the other products or services available?
Think you don't have any competition? Think again. Your customers are likely turning to an indirect competitor that is solving their problem with a different type of solution.
For example: A taco stand might compete directly with another taco stand, but indirectly with a nearby hot dog vendor.
Whether you’re thinking about starting a business or looking for financing to expand one you’re already running, you’ll find writing a business plan beneficial, if not essential.
Many lenders won’t give you money unless they know you have a well-thought out strategy for where you’re going and how you’ll get there. Even if you’re approaching friends and family for money, people who won’t require you to have a plan, it will be helpful to write one. Simply by going through all the necessary steps to put one together, you’ll wind up with a clearer idea of what you’re trying to accomplish and many of the challenges you might face along the way.
Certainly, if you’re going to try to get money from a bank, a government-backed lender, a venture capitalist, or a community development financial institution (CDFI), you will need a formal business plan.
Over the next few weeks we’re going to teach you how to write the perfect business plan-discussing why you should have one, the different types of business plans you can develop, and what goes into each section.
Before we get into the how-to, let’s take a deeper look into what writing a plan will do for you.
The first clue comes right in the description of what a business plan is: a roadmap for your business that outlines your goals and spells out how you aim to achieve them. In other words, it’s a guide for how to set up your business and run it on a daily basis to help you reach your long term goals. And as we said, it’s a worthwhile investment of time and effort even if you don’t need to present it to potential investors.
1) Focus – Writing a business plan will help you gather all of your ideas in one place, hone your message and crystallize your vision. This will keep you from getting scattered, sidetracked, or pulled away from what’s likely to make you the most successful.
2) Research – The knowledge you’ll gain as you explore the industry you’re working in will be invaluable. You’ll get a much better understanding of the niche you hope to fill and where you fit into the market.
3) Commitment – Taking a look at expense projections, sales and revenue forecasts, and all the other dollars and cents aspects of your business will help keep you on track as you move forward, and serve as a built-in warning system if you’re not where you’re supposed to be.
4) Exploration – It’s easy to get so focused on the nuts and bolts of your business that you lose sight of the bigger picture. A business plan will help ground you, but also figure out where you fit within the greater whole, things you may not have taken the time to consider.
5) Objectivity – Talking to friends and family about your great idea can make it seem like a can’t-miss proposition. The supportive environment can make it difficult to anticipate real-world bumps and business realities. Doing the actual math while putting your plan together will help you see whether your idea is truly sustainable or needs some work. It’s vitally important to catch things early before you invest too much time or money.
6) Teamwork – Even solo businesses have team members, whether it’s a supportive spouse or a professional accountant or attorney. Larger companies may have someone to manage sales, another person for marketing, and one for operations. No matter how many people are on your team, it’s important to share the same goals and values as you work toward the future. A business plan will serve to get everyone on the same page as you move forward.
7) Accountability – Business plans have a fairly standardized set of components. Doing the work to put the plan together will make sure you think about all of the important facets you need to cover, and give you standards to hold yourself to as you start to put the plan into effect.
8) Measurement – Laying out your goals and ideas in advance gives you something to check in with along the way to see how you’re doing. Where are you exceeding your expectations? In which areas might you be falling short? While it’s important to see your business plan as flexible, it’s great to have something in writing that helps keep you honest with yourself about your performance.
9) Recruitment – When you’re looking to attract top talent, your business plan will help give potential employees an overview of what you’re all about, and their reaction to the plan will help you know if they’re a good fit. Do they grasp the key issues involved with your business? Fill a slot you need to move forward? Great employees will appreciate how you’ve taken the time to assess your place in the market — as will lenders and investors when you need to raise money.
Okay, you’re sold. You understand the benefits of having a business plan and you’re committed to writing one. What comes next? Decide on what type to create.
Just as your goals and business will not look exactly the same as someone else’s, your business plan will be unique to you. Some elements belong in each one, and we’ll explain each of those below, but your presentation might be completely different. Most importantly, think about who the audience is and what the goals are for the plan.
Most business plans will take one of the following shapes:
Miniplan – As its name suggests, a miniplan isn’t a lengthy document. It can be as short as two to 10 pages, as long as it covers your concept for the business, how you’ll finance and market it, and financial information such as operating expenses, cash flow, income projections and a balance sheet. It’s a great way to lay out your concept or have basic information to show to potential partners or investors. Know your audience, though. A miniplan isn’t a substitute for a longer, full-length document. If it’s for your own personal use, this might suffice. An investor or lender may be looking for something more.
Internal Working Plan – If the primary purpose of your plan is to use it to run your business, it doesn’t have to be nearly as formal as a traditional, full-scale business plan. You’ll want it chock full of details about your finances and objectives, but you can leave out the parts that would mostly be necessary for outsiders, like resumes of key executives and photos of products or prototypes.
Your final presentation can also be a bit less fancy. No need to print it out on nice stock and put it in a beautiful binder. You don’t even have to print it at all, if it’s on your computer. What’s in the plan is far more important than what it looks like. Like the old, oft-folded road maps we kept in the glove compartment before the days of smartphone GPS apps, this is a document you’ll live with, something that will help guide you and keep you on the right path.
A Formal Presentation Plan – This is likely the kind document that originally came to mind when we started talking about business plans. This is the real deal, the one that’ll take the longest, probably be the longest, and will be suitable for showing to lenders, investors and anyone else you need to impress outside the company. When we detail the components below, plan to include all of them in your final document. And pay attention to presentation, spelling and grammar. As opposed to your own in-house plan, a formal presentation plan requires recognized business language and should avoid slang, jargon and shorthand only you will understand. It must be well-written and consistent, especially where numbers and finances are concerned.
Your presentation plan should be printed on high-quality paper, with color, especially if you’ve included product photographs. It should include charts, graphs, tables and illustrations, and be professionally bound.
E-Plan – While having a printed document is still recommended, and may even be required by a potential lender or investor, many business documents are transmitted electronically today, so it’s smart to have a version of your plan that looks great as an electronic document. This could be a simple PDF of what you’ve had printed or something more elaborate, with clickable spreadsheets to manipulate projections. As with each of the above plans, let your needs dictate what kind of document you create.
A formal plan will include all of the following items, and less formal plans, like mini or working plans, will include many of them. We’ll touch on them briefly here, and expand on each throughout the series in its own separate article.
An overview of what you want to accomplish. This is usually the first page of your plan after the title page. However, you might want to save writing it until last, as it sums up all you’ve presented.
A description of your company and its industry, along with the current outlook and possibilities for the future.
Explain how your company will be structured. What does the management team look like? How many employees will you need? Will you have other individuals in charge of certain functions, or run everything yourself? Which tasks will be assigned to each division? What are the expenses related to operating the business?
What, exactly, are you selling or providing? This is where you fully explain your concept. Include a description, the suppliers you’ll use (if any), what your costs are, how you determined them, and how your product or service is different from what’s already available.
A look at who your competitors are, how you are different, your strengths and weaknesses compared to the competition, what kind of market share you’re hoping for, and how you will position yourself to get there.
Given what you know about the existing business conditions, how will you market your product or company? How will you sell? Will you have a sales force or use outside representatives? How will you build the company, handle expansion, and recruit and compensate your employees?
If the main purpose of the plan is to help you raise money, whether from investors or through a loan, this is where you’ll spell out what you need. How much are you looking for right now? How might that change over the next five years? What do you plan to do with the money?
This section will be imperative if you’re looking for money, but it’s important no matter what. Spelling out your sales projections for the future will help you closely examine costs, decide how you’ll allocate your resources, and whether you actually have a viable idea.
This is optional, but would be the place to include information like the resumes of your key management team, reference letters, product photos, copies of major contracts and other pertinent legal documents.
Most importantly, actually USE it, even if it’s not being submitted to a financial institution. You’ve done all the research, the thinking, the projecting, and the writing. Don’t just toss it all in a drawer and forget about it. Take it out on a regular basis, read it, and see how you’re doing.
Remember, it’s called a â€œplanâ€, and things don’t always go as planned, so if you see you’re veering off course, whether intentionally or inadvertently, now is the time to make whatever adjustments are necessary. A business plan is only a snapshot of where you were at the time you wrote it, and it needs regular attention and revising to stay relevant and valuable.
With all the work you did to put it together, you’re already a giant step ahead of most of your competitors. Keep it current to reflect what’s going on now, along with the knowledge about your market you’ve picked up along the way. If a sales strategy isn’t working, eliminate it and find another. When a particular marketing tool produces gangbuster results, allocate more resources that way. As the plan grows and changes with you, it will be an even better guide to your future strategy and success.
Now that you have the gist of a business plan, start working on it and revisit us over the next few weeks for a better understanding of the elements that go into it. There is more to come so stay-tuned!