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.
Writing a business
plan which is clear and accurate can empower your ability
to make solid choices as far as which technologies are
most suitable for your short and long range plans.
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?
A company's business
plan is what lenders such as banks and the Small Business
Administration use in deciding to lend you money. It's
the main company document that your employees —
and you — use to gauge your company's success
and to make decisions about what you should do first,
second, or not at all.If you're starting a home-based
business on a shoestring, some of these suggestions
probably aren't necessary, but you still should 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.
Here is a quick
guide to what you will need in your company's business
plan:
An executive
summary outlining goals and objectives. The
executive summary introduces your business strategy
and probably is the most important section for lending
institutions. If you can't persuade a loan officer in
the first two or three pages that you've got a viable
business proposal, you're going to leave empty-handed.
This summary is also important as a communication tool
for employees and potential customers who need to understand
— and get behind — your ideas.
Brief
account of how the company began. Clearly explain
the origins behind the company's creation and how you
or your business associate came up with the idea to
start your business. Your company's goals. Explain in
a few paragraphs your short- and long-term goals for
the company. How fast do you think it will grow? Who
will be your primary customers? Biographies of the management
team. The management section should include the names
and backgrounds of lead members of the management team
and their respective responsibilities.
The service
or product you plan to offer. A key aspect
of this section will be a discussion of how your product
or service differs from everything else on the market.
The market potential for your service or product. Remember
that you've got to convince lenders, employees and others
that the market you're after is relatively large and
growing. You'll need to do some research for this section.
If it's a locally-based business, you need to assess
the demand for your offering within a given radius,
based on what you determine is a reasonable distance
from your business. If it's a Web-based business or
a business that relies on both the Internet and local
traffic for revenues, you'll need to evaluate demand
on a local and/or a national basis. A research report
from sites such as Forrester Research can cost hundreds
to thousands of dollars. But you may be able to get
some basic information simply by using the Web and its
many search engines and directories.
A marketing
strategy -
How do you plan to tell the world you're open for business?
Will you rely exclusively on word of mouth (not a good
plan unless you've already got a reputation)? Will you
advertise in print, television or on the Web (or all
three)? Will you use online marketing tools like bCentral's
Traffic Builder to get your company listed on search
engines and advertised on other Web sites? You'll also
need to include how much you plan to spend on marketing.
A three-
to five-year financial projection. This section
should include a summary of your financial forecasts,
with spreadsheets showing the formula you used to reach
your projections. You'll need balance sheets, income
statements and cash-flow projections for the entire
forecast period. The summary in this section is also
where you would tell prospective lenders how much money
you'd like to borrow to cover your startup costs. The
assumptions that you make in this section will make
or break your company's success. If you're unsure about
using this kind of financial modeling, find a professional.
It's worth the money.
An exit
strategy. All good business plans include a
section that lays out the benchmarks you'll use in deciding
to call it quits. The strategy could be based on a dollar
figure, revenue growth, the market's reception to your
idea, or a consensus among top officers.
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. |
