Writing a business plan is vital not only to securing small business financing for your business but also for the actual operation you form. It provides a roadmap for the success of your business by outlining the critical elements of success for any venture.
Writing a business plan will explain the company’s vision, its product/service offerings, marketing strategies, and financial projections. It explains the Who-What-When-Where-Why (and How) of the company:
- Who is running the business and who the target customers are
- What the business does, what need it satisfies
- When it will launch or expand
- Where it operates
- Why customers will purchase the product or service offered
- How much capital will be required for the venture to be successful
The business plan must convince a potential funder that your team has the experience in your industry and knows the important trends, including customer preferences. List the experts in terms of operations, R&D, marketing, financing, and HR. Detail in what ways their experiences will add to the company’s chances of being successful.
From the get-go, the business plan must address the company’s business goals and objectives. The plan must convey the excitement of the product or service offering, the advantages it has among competitors in the industry, how the firm will reach its target audience, who is running the organization (key members of the organization and their areas of expertise), and the amount of funding required to make the company grow. Outline the factors that give the competitive advantage to the company as well as its pricing structure.
If your company is a start-up, much of what you will include in the business plan will be an estimate. Detail the R&D that you are conducting and when product prototypes will be available. Most importantly from a funding perspective, it is critical to explain when the company is expected to 1) break even and 2) turn a profit.
Explain where the target market exists and how you plan to reach them in order to communicate your company’s message. How a local pizza shop markets itself is different from the way an IT firm will go about getting new clients. The business plan should describe where the target customers are located and the ways you will try to reach them.
Address the unmet customer needs that the product or service will fulfill and why they will choose your offerings over those of your competitors. A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) will provide a strong overview.
In the financial section of your business plan, it is critical to outline current and future (five years) funding requirements, how the financing will be used, and how long it will take for the enterprise to become profitable. Borrowers are primarily concerned with whether or not they will be paid and the timeframe for receipt of that repayment.
Additionally, the plan must explain how much money the founder(s) of the firm will invest on their own. Banks and other lenders will not provide capital to people that they think might be over-leveraged.
The financial documents that the business plan should include are a projected balance sheet statement, a cash flow projection statement, and a profit and loss (income) projection statement.
The SBA has a number of resources available in advance of submitting a loan application to a potential funder. Budding entrepreneurs can tap into the SBA’s wide network of counselors and business development specialists that are willing and able to help your business start, grow, and thrive.
These resources include:
- A network of nearly 1,000 Small Business Development Centers (SBDCs) all across the country. SBDCs provide management assistance to current and prospective small business owners.
- SCORE is a terrific source of free small business advice. The organization is comprised of more than 10,000 volunteers, usually retired executives, who are available to share their experiences.
- Women’s Business Centers (WBCs) that help women achieved their dreams by helping them start and run successful companies. There are over 90 WBCs are located throughout the United States.
- Over 60 District Offices located across the country to help small businesses launch and grow.
- The online SBA Learning Center that offers virtual training, videos, tools, and links to local resources.
- The SBA’s Office of Women’s Business Ownership (OWBO) advocates for female-owned firms. The office oversees a network of 110 Women’s Business Centers that provide training, counseling, and mentoring geared towards women entrepreneurs — especially those who are socially and economically disadvantaged.
- Procurement Technical Assistance Centers (PTACs) provide assistance to companies looking to sell products and services to federal, state, or local governments. Services are available either free of charge or at a minimal fee.
Finally, writing a business plan will be a key component in applying for SBA Loans, which are popular because they offer low interest rates and terms that are quite favorable to the growth of small businesses.