How to Write a Business Plan

Banks and lending institutions look closely at your business plan when they decide whether to lend you money. A business plan contains the main criteria you and your employees use to determine success. In addition, it is what you need to help make decisions about what to do and when to do it as you run your business. If your business is very small and home-based, some of these suggestions may be unnecessary. However, at least develop a plan that outlines goals, expected costs, a marketing plan and an exit strategy. A business plan shows how you expect to succeed and details how you will measure that success. Here is a simple guide to the basics of a good business plan: An Outline of Goals and Objectives in an Executive SummaryThe executive summary introduces your business strategy. This is the most important section for banks and lending institutions. You must persuade a loan officer in the first few pages that you have a viable business proposal.This summary is also an important communication tool for employees and potential customers. They need to understand your ideas and your business before they can support it. A Brief Account of How You Started the CompanyClearly explain the origins of the company. Be sure to include how you or your business associate came up with the idea. Your Goals for the CompanyExplain in a few paragraphs your short- and long-term goals for the company. How fast will it grow? Who are your main customers? Biographies of the Management TeamInclude in the management section the names and backgrounds of management team members. Be sure to include their respective responsibilities. The Service or Product You Plan to OfferAn important aspect of the summary is a discussion of how your product or service is different from others currently available. The Potential Market for Your Service or ProductYou must convince lenders, employees and others that your target market is relatively large and growing. You need to do some research for this section. For a local business, determine the demand for your product or service within a specified geographic radius. Base this on what you determine is a reasonable distance from your business.If it s a web-based business or a one that relies on both the Internet and local traffic for customers, evaluate demand on a local and/or national basis. A report from a professional research company can be expensive. You may be able to get basic information from the web s many search engines and directories. A Strategy to Market Your Product or ServiceHow do you plan to tell the world you are open for business? Will you rely exclusively on word of mouth? Usually, this is not a good plan unless you already have established a good reputation. Will you advertise in print, television, on the web or all three? Will you use online marketing tools to get listed on search engines and advertised on other websites? Make sure you include how much money you plan to spend on marketing. A Three to Five Year Financial ProjectionThis should include a summary of your financial forecasts, with the spreadsheets you used to reach your projections. Show your balance sheets, income statements and cash-flow projections for the entire forecast period. This is where you tell lenders how much money you want to borrow to cover your start-up costs. The assumptions that you make here can make or break your company s success. If you are unfamiliar with this kind of financial modelling, seek a professional for help. It is definitely worth the money.Learn about spreadsheet software An Exit StrategyThis is one of the most important aspects of a good business plan. Many small business owners look to sell their company as part of an exit strategy. You might pass the company to someone else or take it public. You can base your exit strategy on a monetary figure, revenue growth, the market s reception to your idea or an agreement between the top officers. Whatever you decide, you need to plan so you and your investors recover your investments.



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