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Categorized | Business

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By Bill Leete, SCORE Counselor

The Business Plan

The business plan is a document that should be prepared by each potential new entrepreneur prior to starting a new small business. The business plan, which consists of narratives, financial projections and action items requires research, planning and thinking about a business in a systematic manner. The plan is the blueprint that the entrepreneur should follow to bring his/her   ideas for a new business to fruition and ultimately to a successful enterprise. With a business plan, the entrepreneur can compare the business’ actual performance to the plan. When actual performance starts to deviate from the plan, the red flag should go up and the entrepreneur should take actions to bring the business back to plan and/or to update the plan to reflect the new realities of the business. Failure to do a business plan will almost always result in the failure of the business no matter how great the business idea.

Established businesses should also update and create new business plans to reflect changes in their markets, new business opportunities as well as operational, financial and other problems that impact the viability of their businesses.

In addition to being a planning tool for the entrepreneur, the business plan is also required when approaching financial institutions for funding the business start-up as well as ongoing funding needs. The business plan and executive summary should be the basis for presentations and applications when requesting funding from banks and investors.

The typical business plan consists of several sections and should be concise, clearly written and easy to understand. These sections include the following plus an Executive Summary of the plan that should be prepared last:

General Company Description

Products and Services

Marketing Plan

Operational Plan

Management and Organization

Personal Financial Statement

Start-up Expenses and Capitalization

Financial Plan (Profit & Loss, Cash Flow & Balance Sheet Projections)

The marketing plan is the first section that should be developed. No matter how good the product or service, the new business cannot succeed without a marketing and sales plan. There are many elements to a marketing plan all of which will require considerable research. These elements include the size of the market, market trends, competitors and their market share, distribution channels, pricing, barriers to entering the market, projected market share and most importantly, the market niche for the new business. After the market research is completed, a sales forecast in units and dollars must be developed for the next 2 to 4 years. This sales forecast is the basic input to the other   sections and especially to the financial projections required for the business plan.

The most effective way to create a business plan is to download templates. These templates, which are available from several sources, provide the format and outline of the business plan with questions for each section that should be answered for the specific business being planned. Thus, the complete business plan can be created on the entrepreneur’s own computer and can be modified and updated during the planning process and later as needed. The SCORE website at www.score.org has an extensive template gallery with business plans and financial statements available for downloading as well.

The time and effort required to produce a viable business plan are well worth the investment and significantly increase the probability that the new small business will be successful.

Get free and confidential counseling with SCORE, 111 Pearl Street NW, Grand Rapids, MI 49503. Call (616) 771-0305. Visit our website at www.scoregr.org or email us at score@grandrapids.org.

 

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