Running a business may seem difficult. There is so much to do that sometimes you may feel lost. That is why you need a well-designed plan describing every aspect of running your company: a business plan.
What is actually a business plan?
Business plan is a formal document required from business owners, especially by lending institutions and investors. It lists the set of business goals, states why the company managers think they are attainable and how they want to reach the goals. Business plan should include information concerning the management team, marketing plan, financial plan, risk analysis and more.
What information should it include?
The detailed information will vary depending on the who the target addressee is, but it always should include:
• an executive summary, stressing the most important things and drawing the attention of potential lenders or investors;
• personal data of key people in the business and the scope of their responsibilities,
skills and professional experience;
• market research, including detailed description of competitors and what is the situation of the product or service in the marketplace;
• the marketing plan aimed at increasing product sales to prospects or existing customers;
• information about company’s finances at present and in the past ;
• financial forecasts for the next three to five years, prepared in a form analogical to the information covering past years of trading;
• alternative forecasts presenting possible scenarios if the company fails to reach some of its goals;
• a cash flow forecast concerning the next two to three years with a suggestion of how much funding the company needs;
• how the finances will be managed throughout the forecast period and how the potential loan will be repaid.
How can it help my business?
Drawing up a good business plan is key to securing funding. A solid plan will help potential lenders or investors comprehend the vision and goals of the business. Preparing a business plan helps the management understand their company better and notice some aspects of the business which were not in their focus before. It also draws their attention to potential risks and what could happen if the plan is not carried out, especially in terms of funding.
Every business plan must include the information about how much money the company’s owner has committed to the business. If anything raises doubts of lender or investor as to the owner’s willingness to risk their own capital, it will be difficult, if not impossible, to obtain the necessary funding. The business plan should also contain details of any loans or funding of other type that the company already received from other institutions or investors. The fact that somebody else put their money into your company’s growth will show that you are a trustworthy borrower and that your business is worth investing in. On the whole, if a company wants to receive a loan, the business plan must show the company will be able to pay the interest and return the money over the period of the loan. And if you wish to be granted equity finance, your plan should demonstrate how dividends will be paid to the equity provider and how share value will grow.
All in all, a good plan can get you the money you need to boost your business. If you are not sure how to prepare a professional business plan, contact Target Accounting for help. We have helped many entrepreneurs achieve a success!