Do You Have a Business Plan?
If you are looking to obtain a business loan, most lenders will not ask you if you have a business plan, but ask you “Where is your business plan?” But a business plan is much more than a appendix to a business loan. It is a business guide, an economic tool to let you know how well you are doing financially and help you through the future.
Every business should have a current business plan. It is especially critical if you are just starting a new business or if you are already in business and making a major business decision. This decision could be a significant expansion, a new loan, hiring more employees (hiring your first employee?) or introducing a new product or service. In these instances, a business plan helps you get your thoughts organized and allows you to cover all the important issues of such a major decision in a systematic way. When we are thinking of a new idea and have these thoughts only in our head, we need to recognize that we are in the early stages of our discovery process. It’s not until we commit these thoughts and ideas to paper (most likely a hard-drive), can we examine our thinking in a critical way. We can write them down, put them away for a day or two and then look at them again. Upon rereading them can we say, “Yes! This makes sense”, or “Did I write this?” We can tell if, or where more work is required.
There are several parts to a business plan such as business description, management, marketing plan (target market, product or service advantages, competition, pricing, sales forecast, etc.), the operations plan, and the finance plan. Each one of these parts requires research, thought and planning to complete. However, all this research is, in itself, a great benefit, as it requires that you understand the elements of your business, which, of course, you need to do in general, but especially if you are embarking on a major change or starting a new business.
There are many software programs available to help you in preparing your business plan. Some “help” you too much and eliminate your ability to do most of your own research and gain this critical knowledge. These are not recommended. SCORE has a free program that we have developed and is available at our chapter website seattlescore.org. This program shows you what work you need to do and provides templates but requires that you do the work.
One of the important products of a business plan is the financial plan, especially the cash flow statement. Many businesses fail because of inadequate cash flow and preparing a business plan shows you the cash flow projections so that you can head off any problems before you make your major decisions. Also a month-to-month forecast is provided so that you can MONTHLY see how you are doing and take steps if things are not going according to plan.
So we recommend if you’ve not ever done a business plan, do one, and if yours is old, dust it off and update it.
This article was written by Seattle SCORE Chapter member Fred Parkinson for the Kitsap Sun in Bremerton.