The importance of having a business plan
Many small business owners feel that the demands of running their business are far to overwhelming to worry about having a business plan. This is a serious mistake. Successful small business owners know that the chances of their business succeeding depend directly on the planning process. Your business plan will determine in large part whether or not your small business will survive long enough to grow into a successful larger business. In addition, your chances of obtaining needed business financing will also be directly linked to whether or not you have an effective business plan. The good news is that if you don't have a business plan there has never been more help to guide you in writing one. There are books, other publications, and multiple online sites that can guide you in this process. Here is all about the importance of having a business plan-
- Know what a business plan is-The key to writing an effective business plan is to know what it is and isn't. Your business plan will help you to set goals for your business and design a plan to meet them. Your business plan will also help to detail out what products and/or services your business will be selling. It should also include any information about your target market that you have gained from sufficient market research. Your business plan should also include: a marketing plan and financial documentation for your business. Finally, your business plan should include any management information for yourself and anyone else who works in management.Keep in mind that your business plan is a dynamic document meaning that it may need to change and be updated as your business grows and changes.
- Know the business plan outline-Any potential lender that you work with will be looking for a particular outline when it comes to business plans. This is not the time to infuse creativity and out of the box thinking. Having a business plan that communicates effectively to your lender is crucial and you also want them to take your business seriously. There are several different elements that should be included in your business plan. These elements are:
1. Business summary
2. The mission statement of your business
3. How you will achieve your mission statement
4. Analysis of your market including your competition
5. Detailed financial documentation
6. Outline of management experience
- Know that you need to be specific-Vague predictions and guesswork numbers will not impress or inspire your lender to be confident in your ability to make your business a success. Your business plan should include specific numbers that relate to your business. Your lender will be most interested in whether or not you will have the ability to repay the loan that you are asking for. You will need to make sure that your business plan reflects the long term success of your business and your ability to repay the loan in very specific numbers that are clearly documented.
- Know the documents that your lender will be looking for-Your lender will be looking for specific documents that you should be attached or part of your business plan. These documents include but are not limited to:
1. Cash flow projections-Your lender will need to see that you either have a healthy cash flow or know how that will happen. They want to know that you have the ability to repay the loan.
2. Your marketing plan-Sales is what will keep your business up and running and your lender will want to know how you will generate those sales. Don't underestimate the need for a fully developed marketing plan to be attached to your business plan.
3. Complete biographical information for all management-Experienced lenders know that they are not really investing in a business' product or service but rather the people who run the company. You need to be able to show the lender that you have the right people doing the right jobs who can make your business a success.