How To Write A Business Plan

It is important to have a business plan for your business each yr so that you can see what your needs are for the coming yr and to show yourself and the bank how far you have progressed since your original business plan was written. A new business writes a business plan in order to show their intentions to operate and to provide info to financial institutions in support of start up capital and funding for other operations. In most cases, the banks need to see three to five yr projections showing your intention for the funding. Depending on the scope of the business, they may only finance the first year, and will need additional proof that the business is progressing along the terms of the original business plan before they will advance any more funds.

Since you’re not able to really show much in the way of financial records, having a business plan also shows likely creditors what you expect for the future of your business. They can then compare this to your original plan to verify if you’re moving along as planned. They don’t need to be stuck and an uncollectible loan by advancing funds to a business that has no likely of becoming successful. Even if you’re a little behind your original projections, they’re able to see if the likely is there for improvement, and may even make recommendations for helping you reach your original goals. On the other hand, if your progress is way behind original projections, that can be a sign that your business is failing, so it’s likely that you’ll not receive any more funding until you can prove the business is on its way to profitability.

It is normal for any business to take three to five years to turn a profit, but if you aren’t showing improvement, that’s an area for concern. As you enter into your second year, you should be showing less of a loss and more of a profit even if you don’t yet show a net gain in income. Even if you aren’t looking for additional funding, you should look at this as a warning sign and start making any changes so that you can your business what you originally intended. It may mean your prices are too low, or your expenses are excessive for the amount of business you have and need to be cut. For instance, if you’re selling products from a website, investigate what others are charging for the same type of pieces to see if you’re in line with the industry standard in pricing. If you sell services, find out what others are charging for the same service and maybe your prices are too high, and thus people are going elsewhere for the same service. In reality, these should have been checked first, but any people in their haste to start a business forget the most important step of price comparison.

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