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The critical importance of a business plan | Calvin Goings
You wouldn’t start out on a cross-country trek without a map, so why would you try to start a business in Federal Way without a business plan?
A business plan precisely defines your business, identifies your goals and serves as your firm’s resume. It helps you allocate resources properly, handle unforeseen complications and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers and others about your operations and goals.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful, or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn’t rush into new ventures without a business plan.
There are core questions to answer before you begin writing your business plan. What service or product does your business provide and what needs does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start your business?
Although there is no single formula for developing a business plan, some elements are common to all business plans. Your plan should start with a cover sheet, a statement of your business purpose and a table of contents. Then include a section about your business idea: Describe your business, tell how you plan to market it, review your competition, describe the operating procedures you plan to adhere to, discuss your plans for employees, and how you plan to hire and train them, and describe your approach to insuring the business.
Next, you’ll want to provide detailed financial data, including any loan applications you will file, a list of the equipment and supplies you will need and how much they will cost, a balance sheet showing your assets and liabilities, an analysis of what it will take for you to break even, and a projection of your business' income, including anticipated profits and losses.
Your financial data should be organized in a three-year summary, with detailed projections of cash flow, costs and income, organized month-by-month for the first year and quarter-by-quarter for the second and third years. Be sure to include a discussion of the assumptions on which your projections are based.
Finally, you should have an executive summary in which you summarize the plan including supporting documents and financial projections. The supporting documents should include resumes and tax returns of the principal owners for the previous three years, a copy of a franchise agreement if your business is a franchise, copies of proposed leases or purchase agreements for business space, copies of licenses and other legal documents, and copies of letters of intent from suppliers and known customers.
For a broad discussion on start-up business topics, visit www.sba.gov/starting_business/index.html.
For additional resources in your community, contact the local SBDC at Highline Community College: (206) 878-3710, ext. 5151.
To learn more about Federal Way’s South Sound Regional Business Incubator, visit