A business plan is a critical document for any business. PERIOD
SCORE – the Senior Corps Of Retired Executives lists the lack of a business plan as one of the top three reasons a business fails. Any creditable book on owning or running a business ownership states its importance.
If you put a business plan together there are two types. The first is a business plan for a brand new business with second type for an existing business. To create the best business plan that you can, consider the following ten tips.
1. Complete all sections
Business plans take a little time to create. Don’t rush the process. Part of its value is making you take a thought in your head and convert it to a valuable and considered idea.
2. Focus on cash flow if this is to support a loan application
If the business plan is to support a loan application to a bank, make sure the cash flow projections are solid and make sense. If financial planning is not one of your strengths, consider getting help from a professional so you get it right. Preferably work with someone that you will use on an ongoing basis in the business so they can provide continuous and consistent advice.
3. Include a Break-even analysis for a loan application
A bank is in business to make money. The bank therefore want to see from you that you understand there will be income and costs but more importantly, how long it will be before you get to a break-even situation and whether you have the resources to get there, and just as importantly, what buffer you have if it takes longer than you think.
4. Financials need to be realistic
Points two and three above also concern your finance, but this one is just as important and that is, make sure your financial projections are realistic. If the reader doesn’t think your financial projections are realistic they will question the rest of the business plan, if they decide to take your document seriously.
5. Tell a story but don’t hype the story
This is not a marketing document for somebody to buy your product or service. It’s a document to explain the what, how, when, where, why of both the present and future of the business.
6. Write the plan to the person who knows nothing about the business
A business is a living and breathing entity that essentially has two main components; people and money. The goal is to explain in simple terms to anyone who reads the business plan what the business is about and what it stands for and how the thoughtful and proper use of both capital and labor will be successful and what help is required to contribute to that success, if the business plan’s purpose is to support a loan application. Remember, write the business plan according to the audience that will read it.
7. Keep it business-like and professional. Not a place for humor or personality.
If the business plan is to support a loan application, most lenders are looking to see the direction of the company, whether their capital investment will be used wisely and that the business is something they can believe in.
8. Make sure the details are accurate – don’t exaggerate
A business plan is a place to introduce and explain. Wherever possible, support opinions, thoughts or suppositions with facts and statistics; this is not the place for unrealistic exaggerations. Every business fits broadly into an SIC or NAICS. SIC stands for Standard Industrial Classification whereas NAICS stands for North American Industry Classification System. Reports and information about these industries are available and provide readily available data about an industry and the direction it’s going. Use this data in your reports to give credibility to the business plan. Your local library will help with getting access to this information.
9. Be concise, clear and simple
This is a business document. The reader is not looking for a novel, they can get that from a bookstore.
10. Be careful with the use of technical jargon
Technical jargon can speak to the sophistication of the business plan but it can quickly alienate a reader who is not familiar with all the terms. Use technical jargon sparingly or provide a simple and clear definition, if it’s important to use. Make sure the explanation is generally accepted; not the writer’s pet project. If in doubt, have someone removed from the business read and offer constructive criticism.