Business Plans Provide Guidance and Help with Financing

By Clint Reecer | April 18, 2014

Almost anyone who owns a business, or is thinking about starting one, has been told at some point that he or she needs a formal business plan.

Despite this common knowledge, however, the term “business plan” has been used to define anything from thoughts and ideas to hundreds of pages of sales data. But what exactly is a formal business plan, and why do you need it for your business?

The concept is rather simple: A business plan explains your company, the goods and services it provides, and how you plan to be profitable. It also contains valuable information about how your company will start, operate and grow in the future.

While a business plan may seem simple enough to define generally, the content used to describe these organizational functions is unique to each individual business. In addition to that, a business plan is not a static document; it should be changing as your business grows and adapts to your market demands.

Business plans are unique to each individual organization, but they should all share some common elements.

To start, a good business plan will always include a description of the company and how it operates, as well as information about who will work for the business and what they will do.

The plan should also include information and pricing for the goods or services it will sell, as well as a detailed market analysis describing potential customers and how they can be reached with marketing.

Lastly, a complete business plan should always include information about how it will be funded, in both the present and the future. Be sure to list all sources of startup cash for the business, including personal funds, investments from others and loans you plan to request. Similarly, a business plan should also include cashflow projections and break-even analyses that will illustrate how the business will earn money in the future.

A complete business plan has two very important primary functions.

The first is to provide the owner and management of the business with a set of operating guidelines to follow as they conduct business. The business plan should be used as an operating manual for the business, and should be referred to whenever a decision about the business is being made. Think of your business plan as a road map to success — you are creating a set of directions in the present to guide your company toward profitability in the future.

The other primary function of a business plan is being presented to potential lenders and investors when seeking capital. When starting a new business venture, a complete business plan is required if seeking an investment or loan from a commercial lender. It can also be used as a way to “sell” the idea of your business to friends and family – getting a personal investment is often easier if you have well-developed information to present to your network. A business plan will also help an existing business to seek outside funding for expansion or upgrades, such as new equipment and additional locations.

Don’t let the idea of a business plan be confusing, intimidating or unpleasant. Completing your plan will absolutely be one of the most valuable exercises you will perform as a new or existing entrepreneur.

By taking the time to create a business plan in the present, you ensure that facts and strategy will be the facilitating forces for good decisions in the future.

(You can also view this blog in the Rio Rancho Observer)

About the Author

Clint Reecer

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