Small Business Plans

Compiling Your Small Business Plans ...

Before you get down to the actual business plan itself, we need to set ourselves a few ground rules.

• You need a business plan not only to borrow money, but as a guide to your business goals.
  • A good business plan, which includes your business mission statement, will keep you and your business on track and act as a road map to your business future.
  • Be ruthless with yourself when planning. Prove to yourself that your potential business can succeed. Write the plan for yourself, not your banker. If you can prove and show that the business has merit, you will convince your potential investor as well.
• When drawing up your business plan, look out for any possible setbacks that are likely to happen.
  • If your market surveys show you that you have insufficient market to justify going into business, then don't.
  • If you calculate that you will need more money than you estimated, say so, better to be turned down before discovering, when you are already in business, that you are under capitalized. Be honest and truthful with yourself, that is the least you owe yourself.
• Determine that if you find a weak spot in your business idea, you will investigate it fully and not gloss it over.
  • You must market survey thoroughly because if you don't you will never know if the business is a viable proposition.
  • Without potential customers you are dead as a business.
  • Don't pad your business plan with descriptive and imaginative text. Go for quality not quantity.

Now that we have agreed to be honest with our planning, let?s get to the how of small business plans.

Putting Your Business Plan together ...

All small business plans are standard to a greater or lesser degree. However they also vary to some extent, depending on the type of business they are written for. Here is a standard business plan layout that will cover most business sectors.

Compiling and Printing Your Business Plan ...

Include a cover page, a title page and a table of contents. Put a decent amount of work into the initial impression your business plan will create. Present it well.

• The Executive Summary ...
  • Here is where you summarize your whole plan, give an overview of everything that you cover in depth elsewhere in the plan.
  • You will cover your business mission statement, your potential market, the structure of your business, sales strategies, funding requirements and future profits.
  • But don't include details here; keep it short and sweet, one to two pages at most.
  • Write it last, after you have completed all the other sections of the business plan. This allows you to mention only the crucial points of the plan. Important summary points that will be read first by potential investors.
• Your Business Description ...
  • What will your business be doing? Start with the industry that you will be trading in, is it manufacturing, wholesale, retail, or a service industry.
  • How will you fit in and what is your market niche? What is the demand for your product?
  • What type of business entity will you be operating, Sole proprietorship, partnership, corporation or limited liability company?
  • Summarise some pros and cons. When will you need money, explain how this will increase the business. What are your plans for success?
• Your Business Competitors ...
  • Who are the competition and where are they? Can you do better than them and outsell them?
  • Give a list of your competitors and say who and what they do that is good or bad for you.
  • How will you be better than them? Have you a better product, price, location or quality than them.
  • How will you get their customers to come to you? Detail your market research, analyze yours and recognize the competition.
  • Show in your plan how you can deal with and overcome competition.
• Your Marketing Plans and Sales Strategy ...
  • This is all about customers, so you want to show the who, what, where, when and why of your potential customers.
  • Depending on what your market research found, you can devise plans to sell, distribute and fix prices to meet customer needs.
  • Start with the products and or services you are going to sell; is there a market for them? Do you anticipate increasing demand for your product? Are you going to be employing people to sell your product or services, how are you going to set goals for them?
  • In other words, lay out what you will sell, who your customers are going to be and then give reasons why you think that they will buy from you.
• Your Management team ...
  • Here is where you sell the people who will make your business a success.
  • The more you need small business plans to help raise funding, the more quality and experience you need to show in the management team. No one is going to be keen to lend money to you, or a bunch of you, if you can?t lay out what you all have to contribute to the success of your business.
  • Lay out your and your peoples education, skills, any work history and how all this is ideal experience for your new business.
  • If you are determined to go into a business that you have no experience of, then make sure that you can list some advisors who do have the experience.
  • In this section of any small business plans, you also list the personnel you think you will need at startup and in the future. Where will you get them, what will they be needed for, and how much will they cost?
  • If the management team is to contribute a large part to the success of your business, then cover it in a separate section.
  • Be accurate, but sell the idea that you and your people are fit and capable of running your business and making it a success.

Financial Planning - The Meat & Potatoes of Your Business Plan ...

Now to that part of your business plan that most lenders go to first, the financial planning.

Spend some time on getting this right; you need accurate figures not only for your lender but also for yourself.

Your figures will show you if your business is viable and how long it will take to become profitable.

Depending on the size of your potential business, I would suggest that the financials could be included as the first section of your business plan.

However you may need input from your other sections first in order to complete your financial section so play it by ear.

If the initial financials show that your idea is a no go, then either adapt your concept to be profitable or give up and look elsewhere.

Showing business profitability is a must in any small business plan.

Another problem that many potential business owners have with financial planning is fitting in the concept of demonstrating something for a business that has not even traded yet.

How can you forecast your sales for year three when you have not sold anything for month one?

Not easy, but everyone has to do it and if you give it your best, you will be surprised how accurate you can be.

There is only one purpose to any financial planning and / or analysis and that is to show you and the world how your business can make money.

To do this you need to prepare the following pro-forma statements ...

• Income Statement ...
  Also called the profit and loss statement or P&L, it shows how your business will generate cash over a period of time. It will show your projected revenues or income and expenses over a period. Normally prepare monthly statements for the 1st year of business, quarterly for the second year and annually for the next two to three years.
• Cashflow Projections ...
  Probably the most important statement for yo to get right. Here you will show when the cash is paid out and when it will come into your business. Cash flow is vital to any business, so you need to show that you will have enough to cover the cash expenses of the business in a timely manner. Demonstrating good cashflow can often mean the difference between getting a loan or not. Again, show monthly, quarterly and yearly into the future.
• The Balance Sheet ...
  In here you will show to the world what you are made of at the end of each month, quarter or annual trading perios. Your balance sheet lists the business assets, liabilities and equity, or net worth, at a point in time.

All small business plans must contain, at a minimum, these three statements, because, based on them, you can put together the amount of business funding you are likely to need, during the period before break even and profit.

Show the funding needed, where and when you will spend it and finally how you intend to repay it.

Always show that you are putting some of your own cash into your business.

If you are borrowing, lenders like to know that you are prepared to put your home, life savings or other assets on the line.

So tell them that in your business plan. Show them what and how much is coming out of your own pocket.

Other Matters - Relating to Your Small Business Plans ...

All of the preceding points apply to all types of business, however, don't forget to include in your small business plans any other information that might apply to your own unique or very different business.

Attach a list of the ratios that apply to your business, such as return on investment, break even analysis and return on assets.

If your business needs equipment, include a capital equipment list.

This list will show the equipment that you will need to produce, manufacture or sell your product or service.

Also include your delivery vehicles, office furniture, machinery and computers.

If you can obtain them, include any personal references from any people of note that you might know.

Do the same with any business references, such as former employers.

List contact details for your accountant, attorney and bank manager.

Finally, before printing your small business plans, if you haven't been using your accountant all along, do so now for any final suggestions and checks.

Your plan needs to be complete, to show that you understand your business and how you will grow that business.

This final check prior to completion, can often give your business plan a polished finish.

Have a look at some business plan templates provided by SCORE, a resource partner with the U.S. Small Business Administration ...

• Business Plan for a Start-up Business
• Business Plan for an Established Business

One quick piece of advice here ...

Never, ever think that that is the end of your business plan. Your plan will initially be needed to help you raise money but after that, you neglect it at your peril.