Mapping your path with a business plan
by Joseph SantangeloNew or old, startup or conglomerate, your business needs a plan.
In the startup phase, your plan precisely defines your business, identifies your goals and serves as your firm’s resume. It helps allocate resources, handle unforeseen complications and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. It also informs staff, sales personnel, suppliers and others about your operations and goals.
When expanding, your plan helps evaluate growth opportunities, such as new locations, products or services, or partnering or acquisitions. It can help avoid costly missteps or ventures far from your core competency. Planning can make the difference between success and failure.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. One of the greatest benefits is that it forces you to map out exactly how you expect to make your business successful. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don’t have enough time. But just as a builder wouldn’t begin construction without a blueprint, business owners shouldn’t rush into new ventures without a business plan.
Your plan should answer four key questions:
1. What service or product do you provide and what needs does it fill?
2. Who are the potential customers for your product or service and why will they purchase it from you?
3. How will you reach your potential customers?
4. Where will you get the financial resources to start your business?
Although there is no single formula for developing a business plan, some elements are common to all business plans. Your plan should include a cover sheet, a statement of your business purpose and a table of contents. Then describe your business, tell how you plan to market it, review your competition, describe the operating procedures you plan to follow, and discuss your plans for hiring and training and your approach to insuring the business.
Next, you’ll want to provide detailed financial data, including any loan applications you will file, a list of the equipment and supplies you will need and how much they will cost, a balance sheet showing your assets and liabilities, an analysis of what it will take for you to break even, and a projection of your business’ income, including anticipated profits and losses.
Your financial data also should be organized in a three-year summary, with detailed projections of cash flow, costs and income, organized month-by-month for the first year and quarter-by-quarter for the second and third years. Be sure to include a discussion of the assumptions on which your projections are based.
For a quick read, you need an executive summary in which you summarize the plan. Be prepared to attach supporting documents and financial projections. For loan purposes, the documents may include resumes and tax returns of the principal owners for the previous three years, a copy of a franchise agreement if your business is a franchise, copies of proposed leases or purchase agreements for business space, copies of licenses and other legal documents, and copies of letters of intent from suppliers and known customers.
Elements of the Plan
I. The Business
Description of the business
Marketing
Competition
Operating procedures
Personnel
Business insurance
II. Financial Data
Loan applications
Capital equipment and supply list
Balance sheet
Breakeven analysis
Pro-forma income projections (profit and loss statements)
Pro-forma cash flow projections
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You can find guides to preparing a business plan on the U.S. Small Business Administration Web site at www.sba.gov/library/pubs.html. The SBA also offers a comprehensive guide to starting a business on its Web site at www.sba.gov/starting_business/index.html.
For detailed SBA topic areas, go to www.sba.gov and click on Starting, Financing, Managing, Business Opportunities or Disaster Recovery. Free online courses and workshops are available.
To review Strategic Planning for a Growing Business, click on Managing and then Strategic Planning.
Source: U.S. Small Business Administration
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Originally published in the Nov/Dec 2006 issue of Cape Business
Joseph Santangelo Joseph Santangelo has been a statehouse bureau chief, a corporate executive and currently works for the Connecticut Legislature. 
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