Top 10 Questions about Business Plans Answered

1. What is a Business Plan? A business plan is a written summary of everything you already know about your business and the industry it is in, and the future you expect to create with that business. A well-done businessplan is realistic, but conveys the energy and optimism you feel about your business's future. It is an opportunity to convince the world that your idea is worth the time, energy and money it will take to make it a reality. Make it compelling, exciting, but believable and understandable. A business plan shows what you have now in terms of resources like management talent and a great idea, and what it will take, step-by-step, to get you where you are going. Just think how different our lives would be if Microsoft and Amazon.com had not been created. How different will the world be if you plan well and create your business successfully? 2. When Do I Need a Business Plan and What Do I Want to Achieve Through the Business Planning Process? 2. When Do I Need a Business Plan and What Do I Want to Achieve Through the Business Planning Process? If you are writing a business plan for management planning purposes, be specific about what goals you wish to achieve. Do you want to grow the business, create an exit strategy, and develop a new product? For many, the purpose of business planning is to get funding for a start-up company or to grow an existing business by buying real estate, investing in equipment, creating a new product, or approaching a new market. If you are writing a business plan to get funding, you need to create a statement about the purpose of the funding, and how you will pay back the loaned amount or grow the company, if the funding is through equity investors. For a new business: • When you first think about starting a business and want to make sure your idea is realistic • To attract outside investors, to send to potential lenders, and to have ready to find Board of Directors candidates or key employees. • To use as a base for more detailed tactical planning • To use as a starting point to change as you get more information or as conditions change • To track your progress against after you start your business For an existing business: • When you decide to grow your business • When your technology or business environment changes • When you want to start selling a new product or service • When you want to start selling outside your current market • If you want to acquire another business What are the benefits of doing a business plan? 3. What are the benefits of doing a business plan? Writing a business plan allows you to be sure you know everything you can about your business so you can most realistically assess your opportunities and risks in changing your operation or opening your business. It forces you to think through all the details that will be involved and find answers to problems before you spend money on them. How long does it take to do a business plan? 4. How long does it take to do a business plan? That depends on what kind of business plan you decide to do and who your audience is. For a new business plan for investors or bankers- 20-30 pages, probably with projections for 3 years - this will take at least 40 hours to research and write, maybe more. A business plan for an existing business - can be more or less and may include recruiting and compensation data, and other operational reports. An existing business should allow 2-4 weeks for planning each year. It can take longer to do a shorter business plan! The most-read business plans are not the longest ones, but the shorter ones where each word packs in a lot of meaning, and where the concept and meaning are clearest in the fewest words and simplest terms. You will need to gather a lot of data, but select only that information that helps build your case for the final plan. What is a Business Plan? 5. I'm not a great writer. What is the best way for me to do a business plan? You can have a professional write one for you. If you want to do it yourself, there are a lot of software products on the market, and web sites that can help you in Additional Resources at the end of this course. However, no matter what you choose, you must supply all the information about your business, so the worksheets in this course are essential to help you decide what information should be a part of your business plan. Writing or doing the preparation to write a business plan is an extremely important part of being prepared to open and run you own business. It forces you to think through all aspects before investing your time, energy and money. Even if you do write your own plan, be sure and have it edited, critiqued and read by others who will give you an honest assessment. Most plans are still done on paper, but if your business is to be on the Internet, you might want to consider a plan done right on the web. Plans are also done in PowerPoint presentations, on video, or on audiocassettes depending on your audience. The same information should be presented, no matter what media it is delivered on. 6. How will I know what information to put into my business plan? There is a standard format for a business plan. It generally includes the following, in this order: • Cover sheet • Table of contents • Executive Summary (1-3 pages) • Business Concept or Description (including major business goals) (2-4 pages) • Product/Service Description (4 pages) • Management Team (4 pages) • Industry Analysis (2-5 pages) • Market Strategy and Tactics (3-5 pages) • Financial Projections (5-10 pages, including basic spreadsheets) • Operations (5 pages) (Manufacturing Plan, if applicable) • Appendices (supporting documents) 7. Where will I get the information for my business plan? Much of the information you need will come from your own thoughts, but you must also validate your thinking with hard facts about your business environment to make a convincing argument about why you should open your business. Look around and pick up all the written material you can about the types of business you want to start: their ads, brochures, and web site information. Write down everything you already know in the worksheets that follow, and then set up a plan to find the rest of the information you need to round out your plan. Don't forget to check the telephone book to find your competition. Besides local data, you will need both marketing data and financial data for your industry. We will cover where to find that in detail in the marketing segment of this course. For an existing business you will also use your own business records (financial statements, operational reports, and sales reports). 8. What financial documents will lenders and venture capitalists expect me to provide as part of my Business Plan? New businesses: .. Proforma Balance Sheet (snap shot of the day you open for business) .. Proforma income projections (income/profit and loss statements) for three years. Give detail by month the first year and by quarter the 2nd and 3rd year) .. Breakeven analysis .. A List of assumptions and other notes .. Personal Financial Statement Existing businesses: .. Balance Sheet (3 years) .. Income statements (3 years) .. Cash flow .. Breakeven Analysis .. Income Tax Returns (3 years) .. Capital equipment list .. Personal Financial Statement 9. If I have a great business plan can I be certain of getting funding through the SBA or investors or a bank? And how quickly can I get funded once I have a business plan? You can't be sure of getting funding no matter how well you do your business plan, but one thing is for sure: you are virtually guaranteed that you will not get funding if you don't do a business plan. In doing a business plan you may find that you are not ready to become an entrepreneur yet, that you need to save more money to be sure that you can be successful, that you need additional training or preparation, or that the timing just isn't right to start your company and that you may need to wait a year or two. These are not bad things! Much better to wait and be successful than face disappointment and financial problems for starting too soon. The SBA and your bank will look first at your personal credit. If your credit history is good, it will still take a bank about two months to approve or disapprove your application. It can take many months to get venture capital financing. Expect several interviews over this time, and many questions about how you will make the business succeed. KEY MISTAKE: Appearance counts. Make your business plan easy to read and understand, but most importantly, make it look professional. Typos make you look as if you didn't take the time to do the job right, and might give others the indication that your work is done halfway as well. 10. What are the steps to start the business planning process? This is NOT in the order that it will appear in your business plan, but approaching these issues step-by-step is the best way to develop your plan. Business Description Setting Goals and Objectives for your Business Product or Service Description Management Team Industry and Market Marketing Strategy Financial Projections and Considerations Operational Considerations Wrapping it all up with an Executive Summary