Sometimes it can be hard to get from Point A to Point B without a map or GPS device. For business owners who want to guide their companies on the path to growth, a solid business plan can serve as that map or GPS.
When it’s time to seek financing for your business, the same plan also plays an important part of your loan application.
A solid business plan has two main purposes: First, it shows the bank that you are disciplined enough to take the time and effort to think through and create such a plan. And second, it provides your banker with important details about your company’s products, services, marketplace, operations and finances.
There is a wide variety of templates available to help you structure your business plan. Every company’s plan will be different, of course, but most include the following:
Business Description - This section should describe what type of business you operate. Do you manufacture, distribute or wholesale products, or provide services? Include details like your location, industry, types of products or services, mission statement and legal form of ownership, as well as your overall vision for the company. Where do you see the company three, five and ten years in the future? How will your firm impact the market and industry?
Management Team - Include detailed bios for yourself and all of your executives and managers. Concentrate especially on everyone’s experience as it relates to your business and industry. The strength of your leadership team is one of the most important factors in your company’s success.
Financial Package - Your banker will pay especially close attention to this section, so make sure it is thorough and accurate. The financial package should include a minimum of three years of financial statements (income statement, balance sheet, profit-and-loss statement); pro forma projections, including the assumptions upon which they are based; business and personal income tax returns; a current personal financial statement; and credit authorizations for the owner and principles. An accountant or CPA can help you prepare the financial package, if necessary.
Advertising and Marketing Plan - This section should include details about your marketing mix (online, print, broadcast, etc.), marketing budget, cost of sales, sales force, pricing strategies, and more. It should explain in detail how you will market and sell your products or services and describe your company’s unique selling proposition (USP) or in other words, what is it about your company and your products or services that stands out from the competition?
Market Analysis - Include a detailed description of your target market and industry and a profile of your ideal customer, being as specific as possible. What are current market and industry trends? How is your company positioned to take advantage of opportunities and avoid potential pitfalls? This section is also a good place for a description of your primary competitors and their strengths and weaknesses.
Collateral Sources - Your bank will want to see what kind of assets you can pledge as collateral to support your loan request. If your business plan is viable but your collateral is short, the bank may be able to help you qualify for government lending programs like Small Business Administration (SBA) loans that guaranty a percentage of the loan.
Operations Overview - Describe in detail how you manufacture your products or deliver your services. What are your raw material and labor requirements? How stable is the market for them and how strong are your relationships with your suppliers? Do you currently own and operate the latest, most technologically advanced equipment? If yours is a service business, explain in detail the process behind how your services are delivered to your clients.
Executive Summary - The executive summary should condense your business plan into one or two pages, emphasizing the most compelling aspects of your company and stressing your USP, in particular. The rest of the plan should provide the supporting details, documentation and backup. The executive summary is generally written last, but positioned at the front of the business plan.
PATRICK BARRETT is a senior vice president and regional commercial lending manager at First National Community Bank. FNCB is a leader in providing small business banking solutions in Northeastern Pennsylvania. Visit their website at www.fncb.com or call 1-877-TRY-FNCB.