Most people write a business plan when they need to raise money. I wonder how many business plans would actually get written if the bankers, financers and investors did not require them? Not too many I would expect.
For most people, writing a business plan is intimidating because it is not something they do every day and it adds to the daily workload. For those that are already in business it means taking time out of their busy day to do something that does not make them money and besides they already have their plan in their head, right? For those that are just starting out it is all guess work and they are probably going to take the risk anyway, that is, if they can get the money.
So sit down and write a business plan so that you can get the money that you need. You can embellish it as much as you want to make it look very enticing for the investors and financers. You can even hire someone and pay a couple thousand dollars to get a really good plan. If you are a good writer you might as well save the costs and write the plan yourself.
Wait a minute. What about your own investment? Can you make enough to support your family? Are you going to spend thousands of dollars only to find out that the venture was not worth it? Are you going to spend years tied into a business that can never quite make it because you have put up all your assets for security?
I am here to tell you that business planning is not just about writing a plan to get money, it is about making sure that the venture is feasible and that it will be satisfying. When I say satisfying, I mean with regards to your personal and your financial goals. Writing a business plan is an opportunity for you to learn about your business, to start networking with suppliers and professional service providers, and a way to find out if it is what you really want to do.
When you sit down to write your business plan make sure that you are doing it for yourself first because when all is said and done it is you that needs to know the most about your business. Start with the financial feasibility by producing a set of three-year projections, which includes a cash-flow analysis. Make sure you research each aspect of your project by finding the right information and talking to the right people (suppliers, professionals, service providers, etc.) and be certain that you have covered everything. If the idea is feasible in your mind and on paper you can go on to write notes to the projections and add the narrative portion of the plan.
Take your time, do everything in steps and make sure it is something that you are absolutely sure you want to do. If you do it right the knowledge and insight you gain through the process will give you the confidence that you need to raise the money you require and you will have the ability to create a more successful enterprise.
So you’ve decided to write your own business plan because you know the value that the experience will give you. With the books and software that are out there today you can probably sit down and complete the plan in a day or so, right? Plug in the numbers, add the notes, write the whole narrative (story), print it and get it out to the banks or investors.
If you can complete a plan in a day or so you are either an expert, that has already done all of the research, or you are heading for big trouble, because you have not done enough research. If you are like most people you have a job, a family and commitments that take up a lot of time. It would be impossible to write a business plan that quickly, even if you know your stuff. You have probably heard the old adage, “Rome wasn’t built in a day” well, neither was a good business plan. To create a top quality business plan you need to research each and every aspect as diligently as possible. Take your time and think of everything, don’t leave anything to chance.
That sounds like a lot of work and a long drawn out process. How will you remember or even think of everything? How can you keep track of what you have to research? If you have to set your plan aside for a while, how will you remember where you left off? You may get tired, bored and even careless in your efforts because like most people you probably have Attention Deficit Disorder when it comes to doing this type of work.
The answer is to do your plan in steps. A good guide book or business plan software will ask you to complete work as you go, one step at a time. You read a section, do some research on the items(s) in the section and enter the information that you discovered. This way you are focused on each item as you go and never become overwhelmed. You will also be able to remember where you were when you have to set the plan aside for a few days, without having to re-read a novel. The process may still seem long but if you concentrate on doing your plan in steps it will be done before you know it.
This series of articles has been written in steps because most people don’t have the time to sit down and read a novel. You can even do your financial projections in steps, which is where I recommend that you start. Doing the projections will help you analyse the feasibility of your project before you spend a ton of time writing a complete plan that may or may not work for you.
I am amazed at how many resources there are and how much information is available today on writing a business plan. There is software, documents, templates, outlines and a lot of experts that can help you. Most experts and resources will tell you exactly how to write a business plan and maybe even provide a template that only needs minor changes to fit your needs. All the emphasis is put on "writing" a solid business plan.
I agree that you need a good business plan but I don't believe that you need to spend hours, days or even months writing your story so that people can read all about what you are going to do. In the first place, most of the people that are going to read your plan are bankers or investors that are not so much interested in your story as they are in whether you will succeed. Secondly, you may spend a lot of time writing this great and wonderful story only to find at the end that you cannot make it work.
You need to start by analyzing the feasibility of your prospective business by using good software or a professional that can help you do the research and develop a set of projections that will be sure you have covered everything. Most businesses fail because they have not accurately projected their cash flow needs and perhaps because they have not been realistic in their projection of sales and expenses. Remember that writing a good plan is about first doing it for yourself.
For your plan to be feasible you have to decide what goals you want to accomplish and how you will get there. For instance, you may now have a job that provides you with a steady income. How much must your business make to replace that income and how long can you survive if your income is reduced? Can the project make enough money to satisfy the needs of investors? Investors typically want higher than normal returns on a high-risk investment like a start-up business. Can you meet the loan payments that are required and do you have sufficient equity in the business to satisfy the lender requirements in order to get the loan in the first place? Lenders will look critically at your cash flow and the amount of cash and assets you have invested in the business.
Several years ago I had a newly expanded business that in the first year of expansion increased sales by 50% and produced a substantial profit in the same year. The problem was that I did not properly project the cash flow needs and ended up in a position where I could not pay the bills or payments. How could this be? I asked myself the same question when I had to shut the business down. That is when I first learned about the importance of projections and analyzing the feasibility before leaping in. An inch from success will not get you where you want to be.
Take your time to do your projections and research each and every aspect of your business. It is not just guess work. In fact, you can be very accurate with all your costs and expenses. If you talk to all of the appropriate professionals, suppliers and service providers you will probably be as accurate as possible in most areas of your projections. The area that requires the most research is sales but, there are good techniques to come up with accurate estimates.
If you have researched and prepared your projections correctly and your business is feasible you have done a whole lot more than just create a financial projection. You have discovered what it takes to make your business work, you have created a network of professionals to assist you in the success of your business, and now it is easy to write the rest of the story. So, when you set out to "write" your business plan, start with the feasibility because it will tell you a lot about your business before you even get started. If it looks good you will be able to sell it to the bankers and investors. But, if it doesn't look good you haven't wasted a lot of time writing a fiction novel.