| Articles: Business Planning |
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Please find below informative articles relating to Business Planning. Business Plan Basics The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you'll have to convince investors and loan officers that you can put your plan into action. Once you have raised the money to start or expand your business, your plan will serve as a road map for your business. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones. It will change and develop as your business evolves. Do I need a business plan? Not everyone who starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning. If you are approaching a banker for a loan for a start-up business, your business manager may suggest a Small Firms Loan Guarantee Scheme, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favourably on your application if you have one. Reasons for writing a business plan include:
What's in a business plan? A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors. 1. Executive Summary--features the highlights of your plan and sells your idea in two pages or less. 2. Company Summary--a factual description of your company, ownership, and history. 3. Products (or Services or both)--describes your products and/or services and how they stand out from competitive products and services. 4. Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth. 5. Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones. 6. Management Summary-provides background on the management team, their experiences, and key accomplishments. 7. Financial Plan-contains key financials including sales, cash flow, and profits. What makes a successful business plan?
Sitting down looking at a blank computer screen as you prepare to start your business plan can be daunting. You may want to look at some alternatives that will make the process a bit easier. Hire a Professional - A professional business advisor will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea. Buy a Book - There are many good books on the market that will help you to understand what needs to go into a good business plan. You can read Timothy Berry's "Hurdle: the Book on Business Planning". Use Business Planning Software - A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea. Not everyone who starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a venture capitalist, you will certainly need a comprehensive business plan that is well thought out and demonstrates sound business reasoning. If you are approaching a banker for a loan for a start-up, you will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favourably on your application if you have one. Reasons for writing a business plan include:
A business plan should prove that your business will generate enough revenue to cover your expenses, but a business plan may vary depending upon whom your audience is. If you are writing a plan for your colleagues and partners, for example, to expand an existing business, then the focus of that plan may be more operational than financial. Yes, you are going to show your partners how this expansion will mean more revenues, but they are going to want to know the nuts and bolts of how this new venture is going to be implemented. If you are writing a business plan for a bank, your bank manager will want to see that your ideas are well thought out, but the most important aspect to him or her will be your financials. Are your assumptions realistic? And will the cash flow of the business be enough to ensure that you can make the monthly payments for the loan that you have requested? If your business is making £1,000 a month and your payments are £1,200 a month, the bank is likely to turn you away. When considering an investment opportunity, most venture capitalists look at the obvious trends and market niches. Transcending the business elements, however, the most important factor in a decision to invest in a company is the quality of the people. In real estate, the three biggest criteria are "location, location and location." The venture capital axiom is "people, people and people." VCs will ask, how experienced are the people that are going to run this business? Do they have knowledge of the industry? Have they started successful ventures in the past? What makes a successful business plan?
Your business plan is like your calling card, it will get you in the door where you'll have to convince investors and loan officers that you can put your plan into action. You want your calling card to look impressive, so make sure your business plan is printed out on good quality paper, you have checked the spelling and grammar and that your numbers add up. Anyone who sees errors while reading your plan will wonder whether you are going to make similar errors in running your business. A great business plan is the best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Often you may hear about what a business plan consists of. While including the necessary items is very important, you also want to make sure you don't commit any of the following common business plan mistakes: 1. Putting it off. Don't wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan. Don't wait to write your plan until you think you'll have enough time. "There's not enough time for a plan," business people say. "I can't plan. I'm too busy getting things done." The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees. 2. Cash flow casualness. Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. When you and your friends imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don't spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table. 3. Idea inflation. Plans don't sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas. Don't overestimate the importance of the idea, particularly the importance of the uniqueness of the idea. You don't need a great idea to start a business; you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely on new ideas. A new idea is much harder to sell than an existing one, because people don't understand a new idea and they are often unsure if it will work. 4. Fear and dread. Doing a business plan isn't as hard as you think. You don't have to write a doctoral thesis or a novel. There are good books to help, many advisors among the UKBA organisation, business schools, and there is software available to help you (such as Business Plan Pro, and others). 5. Spongy, vague goals. Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results. 6. One size fits all Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better. 7. Diluted priorities. Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each. 8. Hockey-stick shaped growth projections. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.
Courtesy of Palo Alto Software Inc.
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