A business plan is an essential
part of any small business because of its ability to guide the company. It
charts the future course and defines strategies for achieving the business
goals. The business plan defines risk for the owners and establishes a game
plan. It also provides management with a base line so that they can track their
progress and see whether or not they are on track for achieving specific goals.
Business plans are a necessity for any company that intends to attract capital.
A business plan focuses on the processes that will be implemented to reach
target goals. A business plan increases the chances that a small business has
of being successful.
There are several elements that a
well written business plan should possess. A business plan should fit the needs
of the business and be specific. It should be realistic and implementable.
Targets should be set throughout the plan so that the plan is measureable.
Management is going to need to have the ability to check and see if everything
is on track, and measurable deadlines are one of the best ways of doing that.
The plan should lay out with whom different responsibilities lie and define
clearly any assumptions being made. Most importantly, a business plan shouldn’t
be written and forgotten about. It should be “kept alive by follow up and
planning process” (Berry, 2009).
The elements of a business plan
should be specific to the business that it is outlining. According to Scarborough,
Wilson, & Zimmerer (2009), the elements that should be considered
for the business plan are:
·
an executive summary
·
mission statement
·
company history
·
business and industry profile
·
business strategy
·
description of product and services
·
marketing strategy
·
owners resumes
·
plan of operations
·
pro forma financial statements
·
loan or investment proposal
The best elements for Kyle and Chad to consider would most
likely be the background of the company, description of services, business
strategy, plan of operations and loan and investment proposals. These elements
would share with a potential creditor what it is they do, how it’s been going,
what they are proposing and how they plan to carry out their plan. Once a bank
has read the business plan, they should know everything Kyle explained to me.
Kyle needs to help the banker to understand why he should take a chance on
Precision Auto Detailing.
There are
several things lenders are looking for when they first read a business plan. A
stable capital base is one of the most important things that a lender wants to
see before they will even consider granting a loan to a small business. A
statement of cash flow is important for a lender to determine that the small
business’s capacity to meet its financial obligations. They want to know what
assets you have that can be used a collateral should you be unable to pay back
the loan that they give to you. Lastly, Scarborough,
Wilson, & Zimmerer (2009) believe lenders look for information on
the conditions surrounding the business such as “interest rate levels, the
inflation rate, and demand for money” (p. 201).
When you
are finally ready to present your business plan to potential lenders
preparation is key. You need to appear well informed and prepared for the
endeavor that you are taking on. A well rehearsed 10-15 minute presentation
should be developed beforehand that informs the lender of all of the aspects
that he is looking for before he can make an informed decision about your loan.
The presentation should summarize the background of the small business, the
market analysis, why the small business has a competitive edge, the
qualifications and experience of management, and a financial analysis that
focuses on the lender return on investment. The presenter should be
enthusiastic about the venture, use visual aids when possible, speak in
layman’s terms, and be prepared for questions.
While no
one can guarantee that a perfectly drawn out business plan and flawless
presentation will eventually lead you to the capital you are trying to obtain,
it is the best possible way to increase your chances. Preparing a business plan
that answers everything that your lender needs to know will make your small
business seem much more competent. According to Marte
(n.d.), “the business plan needs to show the lender that providing you with
a small business loan is a low-risk proposition”. If you have managed to
develop a worthwhile concept for a successful small business investors will
follow.
References
Berry, T. (2009, February 18). Planning Startups
Stories. Retrieved October 20, 2011, from 8 Factors that Make a Good
Business Plan:
http://timberry.bplans.com/2009/02/some-key-questions-on-business-plans.html
Marte, N. (n.d.). About.com. Retrieved October
20, 2011, from Small Business Loans 101:
http://sbinformation.about.com/od/creditloans/a/ucbusinessloan.htm
Scarborough, D., Wilson, D., & Zimmerer, T.
(2009). Effective Small Business Management: An Entrepreneurial Approach.
Pearson.
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