The importance of a comprehensive, well thought out business plan cannot be
overemphasized. Much hinges on it: outside funding, credit from suppliers,
management of both 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," says Robert Krummer, Jr., chairman of First Business Bank in Los
Angeles.
Despite the critical nature of a business plan, many owners and
managers 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-they are too busy
running the business. 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. For without a business plan, you will end up
going from crisis to crisis, putting out fires, never looking at your
operation in the long term.
According to business plan experts, an effective document answers
these questions: Who are you? What do you do? What resources do you have?
Where are you going? What do you need to get there? How will you measure
performance? Your plan should contain:
- A resume of the background of all the business principals
- A thorough description of your product or service
- An analysis of the current marketplace situation
- Problems and opportunities facing the company
- A market analysis showing the segment of customers you have targeted; -
Realistic objectives and goals relating to sales, market share and profits
- An explicit statement of marketing strategy (implementation policies are
impossible without explicit strategy plans)
- A detailing of action programs or tactical plans for carrying out
strategies and accomplishing goals
- Preliminary budgets and projected profit and loss statements
- Integration of manufacturing and financial plans with the marketing
plans
- Intended controls that measure actual versus planned performance
In other words, the key is not the cost or size of your plan but the
content. It is an important management tool for planning your business,
setting goals and a time frame, and measuring your business's performance.
All business plans are not the same. They vary depending on the type
and size of your business. However, all plans should be organized into
distinct sections: an executive summary, a description of product or
service, a marketing analysis and plan, a description of the management
team, a financial strategy and an appendix.
Your business plan should be thoroughly prepared, because a sloppy,
poorly thought out plan minimizes your chances for outside funding.
Moreover, the U.S. Small Business Administration and most private lenders
require a business plan when making a funding decision. It demonstrates
that you have carefully thought about the basics of your business and that
you can realistically plan for the future.
In addition, it's a good exercise for you. Putting your thoughts down
on paper helps you to clarify why you are in business, who your customers
and competition are, your strengths and weaknesses and your plans for the
future. Plus, it helps you to set realistic goals and guide your operation
toward meeting those goals.
There are two suggested ways to prepare your business plan. You may
obtain free and confidential assistance from the Service Corps of Retired
Executives (SCORE), an organization of skilled professionals who can
counsel you in your preparation. Or you may decide to hire a consultant to
help you prepare the plan. Even if you turn to outside help, you should be
completely familiar with every detail of your plan, because at some point
you will have to meet with prospective lenders. Your knowledge and
understanding of the plan will influence their decision.
One final word of advice: Before submitting your plan, have at least
two other individuals review it. They should understand lending and
investments and be able to give you constructive suggestions. That way, if
your plan needs work, you can revise it before you submit it to lenders.
Reprinted from the United States Small Business Administration
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