You have a new business idea and you’ve decided to write a business plan. Great! Although not required for a successful business, a business plan is a great way for an entrepreneur to think through their business and ensure they understand any complexities before proceeding. As you prepare your business plan, you’ll be making lots of decisions on issues such as what strategy to pursue, what equipment to buy, what marketing strategy to use etc.
Determine Your Objectives
Some questions to ask yourself about your business: Where do you want to be? Will you be running a business that hasn’t increased significantly in size? How fast do you want to grow? Will you have
be rich and have enough money to buy whatever you want? Answering these questions is an important part of building a successful business plan. In fact, without knowing where you’re going, it’s not really possible to plan at all. You may be surprised that you don’t really want to own a large, fast-growing enterprise but would be content with a stable small business. And that’s okay, everyone is different and has different goals and aspirations.
Goals and Objectives Checklist
What are your goals and objectives for your business? Are you willing to invest your own money and work long hours for no pay, sacrificing personal time and lifestyle, maybe for years? What will the annual revenues be in a year? Five years? What will be its market share in that time frame? Will it be a niche market, or will it sell a broad spectrum of good and services?
What are your plans for geographic expansion? Local? National? Global? Is the company going to remain independent and privately owned, or will it eventually be acquired or go public? These are just a few questions that you can ask yourself before embarking on your new business.
Your Financing Goals
Some optimistic entrepreneurs tend to believe that sales growth will take care of everything, and that their companies can grow simply by generating profits. Sometimes this is a valid assumption, other times it is not. Keep in mind that many businesses have to pay their suppliers before their customers pay them.
Ask yourself if you need financing for your own business, and then what kinds of financing you’re likely to need. Each kind of financing has different characteristics that you should take into consideration when planning your plan.
Some kinds of financing require that you give up some control of your business – whether that is in the form of shares or reduced management decision making capacity (i.e. the financiers might put someone on the board to ensure that you are using the finances properly).
Others, like banks, don’t really ask for any control of the business as long as you pay back on time. However, keep an eye on those interest rates and do your due diligence to ensure that you can reasonably pay the loan back.
How Will You Use Your Plan?
A business plan can have various uses, from monitoring your company’s progress toward goals to getting financing. Deciding how you intend to use yours is an important part of preparing to write it.
Want to raise money?
You need to focus very carefully on the executive summary, the management, and marketing and financial aspects. Explain in great detail how your company is going to make money. If you plan to get a bank loan, you'll need to really show that the business will generate sufficient cash flow to service loans. Equity investors like venture capitalists will need to see how they can cash out of your company and generate a rate of return they'll find acceptable.
Want to attract suppliers?
A solid business plan may convince a supplier that you can outperform your competition and cause them to choose you over your rivals. It may also help your supplier trust you enough to offer supplier credit.
What do you think? What are some other elements of a good business plan? Please share in the comments section below.
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