Why make a Business Plan for your Small Business?
Why do you need a business plan for your small business? A common mistake made by Entrepreneurs is not being prepared. They like to dive into the pool without testing out the water but what if the pool is freezing cold? Then you would regret diving in wouldn’t you? Having a business plan will not only prepare you in planning your small business, but will also serve the following purposes:
- Investors, loan officers and venture capitalists will need to look at your business plan to determine if they want to invest in your small business or offer you a small business loan.
- It will force you to set down some clear goals and marketing strategies for your small business
- Writing down the details can help you visualize all the aspects of your small business.
- It can be a tool in the future to measure if your small business performs higher or lower than expected.
Keep in mind that not all business plans are the same. Below is a basic business plan outline. Don’t rush through your business plan. It is not something that can be written on your lunch break. It requires research and thinking. If you feel that you need assistance forming a business plan for your small business read Help with Business Plan.
A Business Plan should include the following:
Cover Page– Indicate the name of your company, date, owner’s name, address and phone number.
Table of contents– this will inform the reader where items are located in your business plan.
Statement of Purpose– 1-2 paragraphs about the small business you plan to start and how much money you need to start it.
Executive Summary– A short summary of the business plan.
- Historical account of your business or business idea– What inspired your business idea. Did you notice a need in your community that was not being met?
- Goals and Objectives – Outline your short term (1 year) and long term (5 years) goals. Where do you see your business in the future? Don’t make unrealistic assumptions; for example don’t say you’ll be making millions in less than 3 months.
- Your products or services– Describe the products or services your business plans to sell. What is unique about your product or service?
- Location -location is a big factor in determining the success of a small business, so make sure to include your desired location. Include demographics and statistics. For example if you were starting a daycare you could look up statistics of how many kids between the ages of 1-11 are living in your area.
- Management/ ownership– The people in management positions are a critical factor to the success of your business. State your qualifications and experience in this field as well as those of your staff. Demonstrate that you have qualified, well knowledged and experienced people holding leadership positions in your business.
- Marketing Plan– Identify your prospective customers and how you plan to market your product or service. Is there a need for your product/ service that is not being met? Include trends in the market; also forcast the growth of trends in the future. Use graphs to organize this information.
- Competitive Analysis -Is there a lot of competition out there? What do you have that they don’t? Can you offer better quality or better prices? Why should potential customers choose you over the competition?
- Current and projected financial statements–
- Financial Statements– Plan out how much you expect to make in the future.
- Identify risks– Be honest. Lenders will appreciate your honesty and see your information as credible. Lenders know that every business faces risks. List all the potential problems your small business might face and how you plan to deal with those problems.
- Investments needed– Indicate to the lender how much money you need to start your business. Describe your plan on how you are going to use that money. Also state when you plan to pay back the lender and how much interest they should expect to earn from their investment.
- Appendix– In the appendix you can include any supporting information such as resumes (to show experience in the desired field), letters of recommendation and legal documents.
TIP: The content in your business plan is important but also is the presentation of it. Make sure to present your business plan in a neat, appealing, simple fashion. It should be typed, not hand written (even if you have very nice handwriting).