Preparing A Business Plan
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. 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.
The business plan is a major exercise in demonstrating your managerial competence. A plan is a list of activities, a "to do" list. The business plan identifies everything which must be done to achieve the mission at a profit. It identifies with clarity the names of all the people who will carry out each part of the action plan.
A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. 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.
Research, research and more research.
The purpose of research is for the you to make informed choices and decisions. As a business owner you will be asked to make all the crucial decisions about every part of your business. You are responsible for everything that happens in your business and you will be the one held accountable for the success or failure of your business. Having the right information on which to base your decisions is thus the first step that you should take in making any choice regarding your business.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. 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.
The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble. 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.
Before you begin writing your business plan, consider four core questions:
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?
We have also compiled a very thorough check list for you to consider during this phase. Click here download our 1stbusiness Creation Guide http://www.my1stbusiness.com/section/index.php?SectionId=13
Consider the basics
The business plan identifies everything which must be done to achieve the mission at a profit. It identifies with clarity the names of all the people who will carry out each part of the action plan. The business plan starts with the mission statement along the lines "to enrich the lives of our customers by ...". For help with creating a mission statement go to our Start-up Resources section or Ask Your Coach
A standard business plan will include sections on the following: The plan includes a complete industry analysis, identifying all the benefits of the product or service, and all its potential competition.
The part of the plan identifying the business strategy can be summarized under the headings specialization, differentiation, segmentation and concentration. Our specialization is our area of excellence, our core business. It describes our history and identifies our areas of expertise. Our differentiation is our competitive advantage, the way in which we are better, cheaper, faster and nicer than the competition. This section identifies with crystal clarity the reasons why customers will buy the benefit from us. We should then be able to identify our market segment or market niche, those people who care that we are better, cheaper, faster or nicer.
Finally, we identify the resources we will need to concentrate hitting our market segment with our competitive advantage in our area of excellence. We need people, creativity, an advertising plan, plant and machinery, motor vehicles, finance etc. We shall need the co-operation of our partners, other shareholders and directors, customers, suppliers, employees, the bank manager, and even members of our own families. Eventually, we shall be able to put together a sales plan.
Our forecast level of sales will determine our purchases, our need to manufacture, productive wages, etc. We shall need an investment in working capital, i.e. an investment in raw materials, work in progress, finished goods, debtors, and a minimum cash balance. We should be able to finance this in part by the use of trade credit, but no doubt we may well have to borrow, and raise equity. At this stage, we should now be able to compile our cash flow forecast, one of the critical documents required in the business plan. We can also forecast the profit and loss account for the first three months, six months and for the first year. We should also be able to forecast the statement of financial position, the balance sheet, at the end of the first trading period.
These forecast financial statements reflect our business plan, our list of activities. The business plan must also include a list of the key players in the management team. This list should include names, qualifications, previous experience, and a very precise statement of the contribution each person will make to carrying out the action plan. Finally, we always recommend that business people examine at least three comprehensive business plans put together by their reference group, business mentors, mastermind alliance, or even somebody recommended by the bank manager.
Writing the Plan
The body can be divided into four distinct sections:
1) Description of the business
4) Management Addenda should include an executive summary, supporting documents, and financial projections.
Although there is no single formula for developing a business plan, some elements are common to all business plans.
They are summarized in the following outline: If you want to go straight to our Free Online Business Plan Writer, click here. We do recommend that you complete this micro module first before doing so.
Elements of a Business Plan
Statement of purpose
Table of contents
A. Description of business
D. Operating procedures
F. Business insurance
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Break even analysis
E. Pro-forma income projections (profit & loss statements) Three-year summary Detail by month, first year Detail by quarters, second and third years Assumptions upon which projections were based
F. Pro-forma cash flow
A. Tax returns of principals for last three years
B. Personal financial statement (all banks have these forms)
C. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchiser
D. Copy of proposed lease or purchase agreement for building space
E. Copy of licenses and other legal documents
F. Copy of resumes of all principals
G. Copies of letters of intent from suppliers, etc.
Using and Reviewing the Plan
A business plan is a tool with three basic purposes: communication, management, and planning. As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business. As a management tool, the business plan helps you track, monitor and evaluate your progress.
The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments. As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster a broader understanding of where the business is going.
About the Author: Learn more at http://www.my1stbusiness.com/sales-letter/landing2.htm
Ben Botes MSc. MBA, is an Entrepreneur, Speaker, Writer, Coach and academic. He is the founder of My1stBusiness.com, South African Business Hubs Join the My1stbusiness.com Reseller Program and earn 40% referral commission http://www.my1stbusiness.com/affiliate