ASK THE COACH
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Business Plan a Roadmap to Future
By Dr. Ray Angelini
The Saratogian
August 8, 2001
Dear Dr. Ray,
I am starting my own business and need to write a business plan in order to obtain finances from the bank. What do you recommend in terms of writing an effective business plan?
— New Biz in Ballston
Dear Biz,
Writing an effective business plan is one of the most important steps you will take in starting your new business. It will serve as a roadmap for your company's growth and help you set goals and targets as well as help you determine the steps you need to take on your journey to success.
A written plan provides the needed dose of reality that leads to better business decisions. New business owners are often resistant to creating a business plan. New business owners are often tempted into running their business on ego, adrenaline, or hope. Be careful, because this is a common trap. A business plan helps the new business owner prioritize his or her energies, which is of critical importance given that time is limited and distractions so abundant.
The most important reason to have a business plan is to clarify your thinking. It is never possible to have too much clarity. A business plan can help you manage how much of your time and resources are being wasted on projects that detract from your primary mission. A business plan helps clarify where you are taking your business. Having a clear written business plan will allow you and your employees to know and understand your vision and how you plan to get there.
The first step in a business plan is writing an executive summary. This should be your cover page and ideally two pages maximum. This summary should include your business objectives, a description of your business, market and business opportunities and how much money you will need.
The second page of your plan should contain the following components: (1) company history, (2) products and sources, (3) market analysis, (4) marketing strategies and plan, (5) research and development, (6) management and organization, (7) operation plan, and (8) finances and equipment. Try to use plain language and sufficient detail so that the average reader can understand. In this section, use of brochures, drawings, etc. is appropriate.
Finally, end your business plan with a financial statement. This should contain: (1) proposed sales and revenues, (2) proposed net profits, (3) proposed cash flow, (4) break-even sheet analysis, (5) payback period, and (6) financial requirements. These projections should initially be for the first 12 months, then quarterly for the next five years.
Also, you should prepare the following pro forma reports: (1) profit and loss, (2) cash flow, (3) balance sheet, and (4) operating budget. An excellent resource for formulating your vision for your business plan is The One-Page Business Plan by Jim Horan. This will help you begin to create a blueprint for your plan.
Remember, you wouldn't embark on a long journey without a map. Writing an effective business plan will help ensure that your business will become a vehicle for realizing your personal and business goals.
