Published in The Tennessean April 7, 2014
By Ed Rappuhn – SCORE Nashville
“My Business Model is complete. Why should I do a Business Plan?”
Banks and equity investors often require a Business Plan when providing money to small businesses. The Business Model is great for developing your initial pitch, visualizing your business on a single canvas and is easily modified as circumstances change, but it does not have the details necessary for most financiers.
A Business Plan is more comprehensive than a Business Model. There is more written material and detailed financial information. The plan can be read and digested without verbal explanation. So what goes into the Business Plan?
Executive Summary. This is presented first but written last. It includes the highlights of the rest of the plan and if done well, will help entice your audience to read further.
Mission or Vision Statements. These are very short descriptions of why the business exists and your future aspirations – no more than a sentence or two each.
Business Description. Include what you do, who your customers are, where you operate, when you started (or plan to start) and how you run the business.
Organization Plan. Is the business a Sole Proprietorship, Partnership, LLC, or Corporation? Who owns and manages the business and what are their skillsets?
Marketing Plan. Describe your customer segments, competition and overall strategy. Include a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis.
Financial Plan. Include Sources and Uses of Funds, Balance Sheets, Income Statements and Cash Flow Statements. Usually these project forward five years with monthly projections for the short term and quarterly thereafter. If available, include up to three years of historical financial reports. Provide the basis for your projections so the reader knows these aren’t just wild guesses. You should be conservative on revenue projections and estimate expenses on the high end. It’s easier to pay back loans faster than to run out of money and need to ask for more.
The entire plan, including financials, should be about a dozen pages. I have seen well-written 60 page business plans that no one will read! Simplicity is important; use bullet points when appropriate. Give facts, not opinions. “Fill in the blank” templates are generally not personalized and are often repetitive. Work with a mentor that has experience writing or reading business plans. This doesn’t guarantee you will receive financing but does improve the chances of the bank or investor actually reading the plan and acting upon it.
Use the financial data monthly as your budget to determine variances compared to actual results. Read and update your Business Plan once a year. Use your Business Plan as a roadmap to success.
Ed Rappuhn is a mentor, workshop facilitator, and the past-chair of SCORE Nashville. SCORE mentors guide entrepreneurs in starting and growing their businesses. Sign up for a free SCORE mentor, find out about our reasonably priced workshops and other services, or volunteer to become a SCORE member at www.scorenashville.org. Email questions about your business to email@example.com and watch for the answers in future columns.