Developing a Business
For the business owner who has spent hundreds, if not thousands, of hours
thinking about and planning his or her business, it probably seems like
a waste to spend the time, effort and energy to develop a formal business
plan. But, there is a great deal of difference between pondering business
choices and developing a business plan.
There are three important benefits of having a formal business plan.
- A business plan
will be an essential part of any request for financing. A well-prepared
plan improves your changes of getting the funds you want.
- It can serve as
a guide for policies and actions for your firm over a number of years.
Strategies and statements should be well thought out, unambiguous and
capable of being carried out.
- The process of
preparing the plan will enable, if not force, you to focus on issues
that are essential for the future success of your business.
A good business plan
includes many details. It can take a great deal of time gathering detailed
data, interpreting it and presenting it clearly. For example, while pondering
expanding with a new product, it may be OK to target future sales of the
product at $3 to $6 million in a growing market over the next 5 years.
For a formal business plan, the range would have to be narrowed considerably
and the timing of the sales would have to be estimated for each of the
5 years. Also, expense estimates must be realistic and the plan should
include possible contingency plans if the new product sales are slower
A formal business plan should include the following:
- Business Identification
History and milestones
of the Business
Company's products and services
- Market Analysis
Competitive analysis, including competitors
Facilities and offices
Leases or real estate owned
- Financial Information
Income statements, historical and projected
Balance sheets, historical and projected
Cash flow analysis
As you proceed through
the business plan, remember that statements should be supported with data
whenever possible. Data adds creditability. It is often advisable to use
charts and graphs to present the data to make it more easily understood.
The preparation of a full-blown and high-quality formal business plan
can be an arduous task. It can take considerable time and force you to
address issues that easy to put off in the daily operation of your business.
However, it can be worth the effort.
The process of preparing
the plan will put you in a better position to make daily decisions. The
final document will be useful when seeking financing, explaining the business
to potential key employees and someday in creating a document for selling
the business you worked so hard to create.