Note: This is the first article in a 3-part series about Writing the Best Business Plan.
There are literally millions of articles, courses, outlines, and information available, both free and priced.
In fact, the information available is so overwhelming, that it is very difficult to know where to begin and what to trust! These articles are designed to give practical, useful, and valuable advice about how to get it done.
The 3 Major Parts About "Why" To Write The Best Business Plan Some successful businesses operate without a written formal business plan; those business entities had great planning of some kind, as well as other advantages.
All executives, bankers, investors, and business leaders agree that every business should have a formal business plan.
What many new business ventures fail to recognize - and many entrepreneurs do not know - is that there are different types of written business plans, designed for well-defined purposes.
Understanding "why" to write this document (its purpose) will lead to knowing "what" type of document should be constructed! There are 3 Major points (or questions) to know in order to determine the type of plan necessary: 1.
Audience.
Who is the Business Plan being written for and for what purpose? a.
Is it to attract an investor? b.
Is it for a bank loan, SBA-backed loan, or other commercial loan? c.
Is it just for the business owner and to serve as a road map? d.
Is it for multiple purposes, or to be used for various ends? 2.
Scope.
How much information is needed for each type of business plan? a.
If the purpose is to attract an investor or to compete for investment capital, then the business plan should be relatively short, and should be designed as a "sales piece", that "sells" the investor on the feasibility of the business and demonstrates in real and un-inflated terms what is in it for the investor.
b.
If the purpose is for a bank loan, SBA-backed loan, or commercial loan, then the document should still be a sales piece, but should be longer, including plenty of financial data about the Principals, initial collateral, cash balance sheets, projections, profit and loss (if available), business structure, accounting system, and more that the bank will specifically seek.
c.
If the business plan is to be used for multiple purposes, then consider writing more than one business plan in order to meet those various purposes.
Perhaps a "parent" business plan could be constructed from which targeted plans can be extracted.
3.
Long Term Results.
Beyond knowing the audience the plan is for and what should be included, it is vital to understand what the long-term goal is for the plan? a.
If the plan is to solicit an investor, the "sales piece" should include an "exit strategy" for the investor that is attractive.
This is a payback plan for the invested funds and the time frame that the investor will have an interest in the business.
b.
If the plan is for some type of loan, is there a suggested "note", meaning a schedule for paying back the loan with interest.
Are the desired terms of the loan spelled out clearly? Is it clearly shown that the projected revenues are going to be enough to cover expenses, payback of the loan, and still retain profit? c.
Once again, if the desired business plan is to serve multiple purposes, the best idea is to either write a "parent" plan, or consider writing separate plans.
An "exit strategy" is important to build into the plan regardless of its purpose.
When do the Principals want out (sell or retire)? In conclusion, in this article we have taken a brief look at why to write a formal business plan and how that determines the type of plan to consider constructing.
My suggestion is to decide the audience and desired result before writing the plan, or hiring someone for the job.
As with anything positive, it is best to consider your desired result before taking action.
In Part 2, I will discuss "How To Prepare To Write The Best Business Plan".
The rule is: "Proper planning prevents poor performance.
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