A business plan is one of those tools that may seem tedious to create but will be essential to your company’s long-term success. As business owners, we often assume we that we know where our company is going, that the unexpected will never happen, that the company will grow as its expected to. As a business owner, you may have a clear understanding of your business direction, but unless your employees, advisors, including your banker and accountant understand your objectives, you may be doomed for failure. Your business plan is the first step to ensuring that these expectations come to pass.
What is a business plan?
A business plan is guidelines for a how your business will be run. The easiest way to think of it is like a blueprint of a house or the game plan of a football team. The important aspects of the business, from financial matters to employee expectations, are laid out in a business plan. This allows for proper management of a company and ensures that the future, and any possible complications, are planned for.
A proper business plan should cover every detail of your business. Financial expectations, management structure, and sales plans are only a selection of the items that can be incorporated into a proper plan. This helps you to assess the viability of the business, what it sells, and whether the owner should look at changing how goals are accomplished. Essentially, it helps determine, and ensure, the viability of your business.
Setting up a business plan
Inside the plan should be the answers to any question a new employee, investor, or lender might ask and that business must be ready to answer. Will they be owning their physical location or renting? What will the monthly expenses be? How many employees are they looking to hire? What is their sales and distribution method? All of these questions and many others will need to be answered.
Before making any major moves the business owner should sit down with a financial advisor, a lawyer, and an expert in business planning. These people will help the owner by providing insight and knowledge that the owner may not have on their own. A financial advisor will help to create realistic goals for the firm while analyzing its cash flow and reserves projections to ensure unforeseen obstacles can be overcome. Legal specialists will help to create a corporate structure that minimizes both legal liability and taxes. In the end, the owner can expect to have a clear outline of their goals and the paths they will take in achieving them. In fact, the money spent in the planning area may be the best money spent to insure the success and long term growth of the business.
The time pressures of a small business owner are enormous. You will most likely find data transfer from the time spent with your advisory team is best placed in the hands of an advisor who can efficiently document both the narrative and financial portions of your business plan. This is especially true if your plan is being written with plans to obtain financing.
The most important thing to remember is that a business plan is not a static document. Plans should expect to change as a company grows or new obstacles arise. Having an initial plan helps to prepare for dramatic shifts, such as financial issues, loans, or if the owner decides to shut down or sell the business. Continually updating this plan ensures that it will always be able to provide relevant guidance in the moment.
Planning for your financial needs
Banks feel more comfortable loaning money to a company that has a well thought out business plan already in place, as it puts less of a risk of providing a loan. By presenting a completed plan the bank is made aware that the borrower is prepared to take responsibility, and will ensure on-time payments, with less risk of defaulting. A detailed plan also helps a bank’s analysts to understand cash flow, past financial decisions, and to see that your company is being well managed.
A business plan can also assist in attracting new investors when a business is ready to grow. Angel investors and venture capitalist may be intrigued with a pretty presentation, but they will be much more inclined to invest in a company that has a set plan laid out. In either scenario banks and investors will go over company details with a fine-toothed comb, so a well thought out and directed business plan will make the process easier.
If you don’t have a business plan in place already, you may still be able to obtain financing. In cases like this our team works closely with clients to quickly create a plan, complete with a full analysis of your finances. We tie this into a larger lending file that we then use to completely underwrite your request for SBA, USDA or other financing.
If you’d like more information on setting up a business plan, or how to best position your company for funding, our team is always here for you.