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about business plans

Business Plans are required for bank loans and investors - NBA can assist you with your financial report, the most challenging part of any business plan

Business Plan - Purposes and Uses

There are Many Good Reasons To Create a Business Plan

What is a Business Plan?

A Business Plan is a written document describing, in financial terms, the business you want to start, what you want to do with it and how it will become profitable as you do it. It sets out your purposes and goals and it is intended to create a foundation from which to build your business or expand an existing business. Business plans usually projects out about five years, and details how you are going to get from here (with the resources you either have or are seeking) to there, with full explanations and assumptions of what the projected five year outlook looks like. Included in your statement of objectives is a description of the market you wish to serve, the feasibility of starting or expanding your business, your market strategy, and a formal profit-and-loss projection and cash-flow analysis.

Specific Ways a Business Plan Can Help You

Whether your goal is to use your business plan as a roadmap to financial success, a way to attract top talent in your industry or as a means to secure financing, there are some very real benefits to laying out your intentions in an official business plan.

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Objectivity A written business plan forces you to take an objective, critical, unemotional look at you business in its entirety. You will gain in-depth knowledge about how you plan to run or are running your business and can make changes and additions as seems necessary.

Operational Tool A business plan can be looked at as a tool which will help you to manage your business and work effectively toward its success. It steers you a pre-planned direction but can always be re-evaluated a long the way should changes be required.

Maintain Focus Contains your product info, employee info, financial estimates and your plans for the future. When making changes and updates to your business, these changes should be reflected in your business plan.

Securing Financing Financing your business begins at startup and continues as your business builds and expands. Financing may be a constant need. When you look for outside financing, one of the most important things your would-be investor will want to see is your business plan and why he should invest in your business. Private investors and banks want to know what plans you have for running your business, what your projected revenue and expenses will be and will then decide if they feel your plans are attainable should they invest in your company. A business Plan provides the basis for your financial proposal.

Motivation There is something about breaking down your business vision in writing. A well organized layout of your business plans can be very motivating because you can begin to see, in black and white, exactly what it will take to get your business off the ground.

Helps Others See Your Vision If you plan to bring others on, they too must see and share in your vision. Talking about it is nice, but the written, formal plan provides an organized, well -constructed argument as to why someone should see your company as a worthwhile investment of personal time and resources.

The Many Uses of a Business Plan

Once you have your plan in writing, there are many things you can do with it. Remember, if you know ahead of time what your intended uses will be, your business plan can be written with these uses in mind.

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Grow your existing business Create an annual plan where you can establish strategy and allocate resources according to strategic priority. You can guide your growth, manage your priorities, assign responsibilities, track progress and plan for future cash needs. Revisiting these items once a year will help your company stay on track.

Back up a business loan application Lenders want to see your business plan and will expect the plan to cover the main points of your vision backed up with financial analysis.

Seek investment for a business, whether it's a startup or not Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points of your vision as well..

Create a new business Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen and when.

Valuation of the business for formal transactions Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, why and how much that will cost and how much it will produce.

Sell your business Usually the business plan is a very important part of selling the business. It helps buyers understand what you have, what it's worth and why they want it.

Deal with professionals Share selected highlights or your plans with your attorneys and accountants, and, if this is relevant to you, consultants.

Develop new business alliances Use your plan to set targets for new alliances, and selected portions of your plan to communicate with those alliances.

Share objectives with your management team Make selected portions of your business plan part of your new employee training and set goals with them to accomplish their part in the plan.

Decide whether you need new assets, and whether to lease or purchase them Use your business plan to help decide what's going to happen in the long term, which should be an important input to the classic lease vs. purchase. This decision will be based upon how long will this important lease or purchase will last in your plan.

Hire new people This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.

Decide whether or not to rent new space Rent is a new obligation for expansion, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn't that be in your business plan?

Deal with displacement (Opportunity Cost) Displacement or Opportunity Cost is probably by far the most important practical business concept you've never heard of. It goes like this: "Whatever you do is something else you don't do." Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.

Share your strategy, priorities and action points with others Your business life goes by so quickly: a rush of answering phone calls, putting out fires, etc. Don't the other people in your business life need to know what's supposed to be happening? Don't you want them to know?

Set specific objectives for managers Good management requires setting specific objectives and then tracking and following up. Many existing businesses manage without a plan. In truth, you're really just taking a short cut and planning in your head but as your business grows you want to organize and plan better. Be strategic. Develop a plan, don't just wing it.

Credit: Tim Berry