Critical Steps
to Writing a Business Plan
Writing
a business plan can be an overwhelming task. These feelings
often translate into immobilization or confusion as to how
to start the business plan. Starting a business plan begins
with the first step:
1. Audience
& Funding Type: When writing
a business plan, you must determine who will be reading
it. This decision will shape the business plan. Do you plan
to go for bank financing (debt finance) or investors (equity
finance)? Each form of funding for your business has pros
and cons. For instance, the venture capital market can be
very time consuming and competitive. Do you have the time
to write the
business plan for investor funding and to network within
the community?
Writing a business plan for investors
is 15-30 pages with in-depth analysis and full details of facts and figures
to support assumptions of the market.
Writing a business plan for the bank
is 10-15 pages and focused with the bank's concern with risk. A venture plan
presents the upside and potential return on investments, whereas a bank plan
reduces the risks and sells the ability to repay the loan.
2. Research
& Information Collection: Once you have made the decision
of the type of funding your business requires, it is time
for the research. Business
plan research covers several key areas:
Insight from your experience
working and observing the industry you will enter. This data will have to be
backed but by the next two sources.
Published information from library,
Internet, and paid database services will provide information on the market
growth, overall industry perspective, and customer profiles.
Field research covers interviews
with customers, suppliers, competitors, and industry experts.
This provides the real insight behind all the published facts.
3. Collection
Files: The easiest way to go about collecting all your
experiences, interviews, and research is to create files for
each section of the business plan. These files can be: paper-based,
computer files or set-up using business planning software.
As you start the research and collection phase of planning,
fill your files with notes and printouts.
4. General
Industry Overview: Begin the research process with an
overview of the industry; uncovering industry and association
reports. By having a general understanding of the industry,
you will avoid embarrassment in contacting experts with basic
questions. Begin the field research once you have a good grasp
of the industry fundamentals and need answers to the hard-to-find
information.
5. Analysis:
Once the bulk of the data has been collected, the process
of analysis begins. Look at building a competitive profile,
contingency plan, risk assessment, etc.
6. Financials:
Start the financials when you have found some average industry
ratios for your business. Work closely with your accountant
to develop realistic projections. Being overly optimistic
will raise eyebrows with your investors or banker.
7.
Executive Summary: Save the first section for last. When
you have thoroughly, completed all sections of the business
plan, write the summary. Highlight the key points and include
the return on investment or loan payback requirements.
8. Review
& Editing: Remember, you only have one shot at making
a good impression. A well-written business plan that opens
doors and wins the money is a plan that has been revised and
reviewed. Do not forget this important step. Ask others for
feedback. Make certain to edit, proofread, proofread, and
proofread.
Business planning is not
easy but by following these critical steps to writing
a business plan, you will ensure your business has a chance
at funding and success in the future.
Darrell Zahorsky
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