Whether you are starting a new business or have an existing business seeking a capital infusion it’s a good idea to develop a fluid business plan that provides a roadmap for your company’s direction and intended success. Your plan should project out for the next three to five years and include the following eight categories:
1. An Executive Summary: This is the most important part because it provides the reader with a quick snapshot of your business. I recommend you complete the following sections first as they will shape and add a richer dimension to your summary.
2. Company Description: Describe your company, what you do, how you do it and the needs your company fills. It is your marketing script that can quickly help a lender or investor understand what you are uniquely bringing to the market place.
3. Market Analysis: Obviously it is fiscally responsible to research your target market but this step is often neglected with the excitement of what appears to be a “good idea”. Who is your target market and why is your product or service relevant to them. What need are you satisfying and how is the market currently filling this need? Who are your main competitors and what advantages does your business or product offer over them.
4. Organization & Management: A good outline of the management structure of your company shows that you’ve considered every detail. Include flow charts wherever possible with narratives to show which person or job title is in charge of every function of the daily operations. As you write your narrative make sure that all job responsibilities are well-defined. In addition address the existing or proposed legal structure of your business. Discuss any legal or compensation agreements you currently have or would want to have in place.
5. Service or Product Line: Define your product or service in as much detail as possible? Address the benefits to your customers or clients and address the life cycle of the product or service with solutions for future replacement products and the potential for “upselling”.
6. Marketing & Sales: Marketing is an investment in future sales but only if it’s done correctly. A plan that is not thoroughly researched can be extremely costly and have disastrous results. Take the time to detail a well-researched marketing strategy. I can’t stress enough the importance of research, knowing all of the costs and anticipated time to recoup your investment upfront is paramount to getting the results you want.
7. Funding Request: If you are seeking financing, state how much you need to move forward and illustrate how you intend to use these funds. This is an important step even if you’re investing your own money in the business. Make sure you also include an outline for repayment.
8. Financial Projections: If you are an existing business you’ll want to include a historical accounting of your company’s financials plus a current year-to-date balance sheet and then financial projections for the next three to five years. Be sure to address how the additional capital will increase your revenues over this time period. For a new company starting out your projections will be based on current and future market trends.
I also recommend you complete your well written business plan with a table of contents and an appendix at the end. The appendix is optional but it’s a place to put valuable information such as permits, resumes, applicable leases and other pertinent documents.
Written by Tracia Larimer. She is a Business Finance Consultant with Azara Capital Solutions, LLC specializing in Business and Commercial Finance. Her sweet spot is the tricky to finance situations. She brings 25 years of experience to every transaction and it’s this experience that allows her to approach each financing request from not only a strategic perspective but also a developed knowledge of the underwriter’s mindset.