Business Plans

by Michael Mohajery, Counselor
Chapter Chair

Most people think that the primary purpose of a business plan is to raise capital for a business via conventional bank loan, “angel” investor, sale of stock and/or any other of the myriad ways of raising money.  While this is absolutely true, a well-researched, well-constructed business plan will serve another, and perhaps even more important, purpose; i.e., the “playbook” for running your business successfully.  As conditions change and new data is generated, you may replace assumptions that you made about that data in the business plan with the factual data you now have, update your projections, and continue to use your up-dated business plan to run your business.

While the business plan starts with the “Executive Summary”, that is not where you start!  Preparing a business plan is a little like preparing your income tax return; i.e., with your income tax return, you prepare the schedules first, and then all of the information from the schedules is summarized on the first two pages of your return.   Similarly, you gather first all of the data and information outlined in the following paragraphs, and only then do you write an Executive Summary that provides a synopsis of your business plan in hard-hitting fashion so that you pique the interest of the reader enough that he or she is motivated to study the body of your plan.

So, what do you have to put in your business plan?  What are the minimum requirements?  The task of preparing a business plan can seem daunting.  At the very least, your business plan must define:

  1. Your business;
  2. You;  i.e,  why you are uniquely qualified to run that business;
  3. Your experiences, and how will your business capitalize on them; (
  4. Your product or service offerings;
  5. Your competition; i.e., their strengths and weaknesses and how you can effectively compete in the marketplace; and (
  6. Your clients and/or customers; i.e.,  who they are, where they are, their consumption patterns and how your product or service will fit their needs.
You will need a good set of projections for:
  1. Units sold;
  2. A pricing formula to well-position you in the marketplace;
  3. Anticipated revenues to be generated; and
  4. All the costs associated with providing those revenues.It is critically important to state all of the assumptions you use in these projections.

When preparing your business plan, therefore, it may be helpful to keep the following in mind:

  • While, ideally, you would like to have positive cash flow from the beginning, it is far more likely that it will take some time before you will start to see positive cash flow; thus, your borrowing needs should not only address the initial capital requirements for starting your business, but should account for these shortfalls as well.

  • A good business plan should be supported by factual data, if such data is available.  If factual data is not available, you will need to make projections that are based upon defensible assumptions.  While future events are never certain, the lender should be able to gain a very large degree of confidence that your business is capable of generating the cash flow necessary to service the loan and still prosper.

  • Oftentimes, you will be required to support your business plan with lots of data.  To improve your presentation of this data, you can summarize the data and the resultant projections in the body of your business plan, but make the underlying figures available in appendices to your plan.

This entry was posted in Planning. Bookmark the permalink.

22 Responses to Business Plans

  1. samuel holmes says:

    i need help learning how to use asset based loans to buy the business that iam looking at can i please get some one from score to help me thank you

    • Manuel says:

      Business plans are VERY important. You delniitefy have to put a lot of thought and time in constructing one. Put yourself in the lender’s situation if some random guy came up to you with no clear plan, why on earth would you give him $20k? If you are sure that you’ll make a or are already making a profit, spell it out for them. Show them how you’ve flourished and how you expect to grow in the future with this money. Obviously you don’t have to know every specific detail going into the distant future, since no one can predict what will happen with your business, but at least develop likely scenarios so you’ll be prepared for anything.Good luck!

  2. admin says:

    Samuel:
    Glad to help. Please go to our website, http://www.pittsburgh.score.org, and register for mentoring/counseling. A counselor will contact you. Our counseling is free and confidential. If you are not in the Pittsburgh area, please go to your local SCORE Chapter or request e-mail counseling.

    • Rafaela says:

      I am looking to start a nralduy service/laundromat in my hometown. I have a superb business plan and location(location is everything!) for this business. The problem is MONEY! $250,000 to be exact. Of the 5 aspects banks/investors look for, I only have 3. 1. Experience I have been a store manager in the retailsector for 4 years, and have handled P L businesses quite well.2. Credit Score My credit is around 7703. Business Plan- Amazing business plan for the nralduy business (have read books, websites, join memberships over the last 3 months to gain better insight of nralduy service).4. Equity-NONE. Just had a baby with my ex-girlfriend which drained all my savings.5. Collateral-NONE. Not too many 24 year olds have enough collateral at this point. My family members have all owned their own businesses. I know what it takes to run your own business. I know that if banks/investors could see my work ethic and enthusiasm they would help me. CAN YOU?

      • admin says:

        Rafela:
        Samuel:
        Glad to help. Please go to our website, http://www.pittsburgh.score.org, and register for mentoring/counseling. A counselor will contact you. Our counseling is free and confidential. If you are not in the Pittsburgh area, please go to your local SCORE Chapter or request e-mail counseling.

        • Uci says:

          If you’re only really asking about training, then it would depend on the size of the business. If there’s only about 1 to 10 people, then it would usually be the duty of the owner to train new staff, as he or she would be the person with the most interest in ensuring that everyone knows what they are doing. If you go into 10 30 or so staff, you’d probably have an operational or production manager who should take care of training. Most businesses don’t fail because of inadequate training though. As you pointed out, it’s more about lack of planning. I ran my own small businesses for a few years, and I made sure to only hire people that didn’t need any training!Is your concern that businesses fail because of no proper training programs?

      • Mody says:

        This is very basic, but I usually start with this format:The Business Idea – What are you selling? The Product/ Service – Who are your customers? Is the market growing? What makes your product so unique from the competition? Marketing strategies to expand your marketshare Packages and pricing Manpower – What skills are needed to run the business? Production- What capital, resources and materials are needed for the business? Targets/ realizable goals Finance – Where will the money come from to start the business? SWOT(Strengths, Weaknesses, Opportunities, Threats)

  3. Graham Trett says:

    But wanna admit that this is very helpful , Thanks for taking your time to write this.

  4. Catamina says:

    nice articles thanks for sharing.

  5. Belina says:

    this is the third website that i found about this. and your explanation is the better.

  6. Joseph says:

    It is a thing I have to do more research into, thanks for the publish.

  7. Altiva says:

    please keep this blog always updated with your great information and ideas.

  8. Yessenia says:

    Could be rare to find skilled individuals on that issue, nevertheless, you sound like you understand what you are dealing with! Thx

  9. Thanks for the amazing info. I find these posts have a lot of material. I can’t wait to get a chance to impliment all these great posts. Thank you very much.

  10. Carmela says:

    i finally decided to write a comment on your blog. i just wanted to say good job. i really enjoy reading your posts. thumbs up.

  11. Excellent post. I was checking continuously this blog and I’m impressed! Very helpful info particularly the last part :) I care for such info a lot. I was looking for this particular info for a very long time. Thank you and good luck.

  12. marketing says:

    I was suggested this blog by means of my cousin. I am not positive whether or not this post is written through him as no one else recognize such designated approximately my problem. You’re amazing! Thank you!

Leave a Reply