Business Plan Basics

The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. This is especially true for those who want to purchase a going-concern business. Even if you are expecting that the business seller will be financing part of the purchase price you will need to convince him/her of your credit-worthiness. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you'll have to convince business sellers, investors and loan officers that you can put your plan into action.
Once you have raised the money to buy, start or expand your business, your plan will serve as a road map for you. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones you have set out. It will change and develop as your business evolves.


Do I need a Business Plan?

Not everyone who buys, starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a business seller or venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning.

If you are approaching a banker for a loan to buy a business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.

Reasons for writing a business plan include:

Support a loan application to buy or start a business
Raise equity funding to expand a business
Define and fix objectives and programs to achieve those objectives
Create regular business review and course correction
Define a new or newly purchased business
Define agreements between partners
Set a value on a business for sale or legal purposes
Evaluate a new product line, promotion, or expansion

What's in a business plan?

A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors.

Executive Summary--features the highlights of your plan and sells your idea in two pages or less.
Company Summary--a factual description of your company, ownership, and history.
Products (or services or both)--describes your products and/or services and how they stand out from competitive products and services.
Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth.
Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones.
Management Summary-provides background on the management team, their experiences, and key accomplishments.
Financial Plan-contains key financials including sales, cash flow, and profits.


What makes a successful business plan?

A well thought out idea and strategy
Clear and concise writing so nothing is ambiguous
A clear and logical structure that show's that you know what you are doing
Illustrates management's ability to make the business a success
Shows realistic sales, expense and profitability projections

How do I write a business plan?

Sitting down looking at a blank computer screen as you prepare to start your business plan can be daunting. You may want to look at some alternatives that will make the process a bit easier.

Hire a Professional
A professional consultant will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea.

Use Business Planning Software
A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea.