|Business Plan Basics||| Print ||
A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
You have an idea for a business, but will it work? And will you be able to convince a bank or other source of finance that it will be successful? Most entrepreneurs will need some outside finance. If you are to raise the necessary money, you will have to give a potential lender a convincing business plan.
Each funding organisation has its own rules for considering a business plan. Prepare one carefully to satisfy their particular regulations. For some types of finance you must present a business proposal in a standard form, which may include an independent accountant's report. Lenders will want to know:
Banks and other financial institutions usually make a charge for setting up a loan or overdraft facility. This should be allowed for in your planning calculations.
Plan Your Work
"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 importance of a business plan, many entrepreneurs 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. 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.
Before you begin writing your business plan, consider four core questions: