Developing a Successful Business Plan
A well-crafted business plan can be a blueprint for success. This multifaceted tool is as important to established business owners looking to grow their companies as it is to budding entrepreneurs.
A business plan defines your business, outlines your goals, and lays a strong foundation for achieving them. A valuable resource for investors and lenders, a strong business plan can help you secure capital for expanding operations. As your business grows, your plan will help you respond to changes in the marketplace and your industry. Let’s take a closer look at three essential business plan elements: the executive summary, the business description, and the financial data.
1. Executive Summary
First impressions are everything, and this quick snapshot of your business has the potential to attract or discourage investors. This is your opportunity to effectively summarize your company’s history and articulate your mission:
- Briefly explain the employee and management structure.
- Describe your location and facilities.
- Provide relevant financial information.
- Disclose strategic corporate relationships.
- Highlight key accomplishments.
By the end of your executive summary, you want your readers to know about your products and/or services, understand the demand for your business, and believe in your potential for success.
2. Business Description
After a compelling introduction, it’s time to provide details. Here, it is important to accomplish the following:
- Describe your business.
- Identify your business’s niche in the marketplace.
- Demonstrate your industry knowledge.
As you know, there must be a market for your products/services, and your business plan can outline how you are going to attract and maintain that market. Ask yourself some basic questions:
- What are you selling?
- Who are your clients?
- Who is your competition?
- What makes your firm unique?
In answering these questions, demonstrate the ways in which various components of your business work in concert to accomplish your objectives. For example, how does your location support your business? What experience do you and your management team bring to your operation? What are the specialized skills of your workforce? Remember, your intent is to construct a winning approach and make your readers confident about your business.
3. Financial Data
Here, startups need to project future performance, while established businesses need to detail the historic performance of their companies, as well as project future earnings. Include three key financial documents:
- Income statement
- Cash flow statement
- Balance sheet
Lenders in particular may focus on your cash flow statement, which details how money is earned and spent in your business, because poor cash-flow management can sink even profitable businesses. From the perspective of the lenders, accurately projecting cash flow is essential to meeting your financial obligations. Lending aside, effective cash-flow management can benefit your business by helping you maintain liquidity, minimize your credit obligations, and minimize your interest expenses.
The Sky’s the Limit
Think of your business plan as a building with many floors, each fulfilling a function. The function of the foundation is, of course, to present the information that can make your plan a tool for raising capital. If you shortchange this part of your plan, it’s possible that your business will barely get you off the ground.
Additional functions of a well-engineered business plan include helping you manage daily operations, make decisions in line with your ultimate objectives, and stay on track with your plans for growth.
To keep pace with change, review your plan every year and revise it, as needed. If your business plan helps your business adapt to market fluctuations, industry developments, and business advances, the sky’s the limit.