(Submitted by Chris Smalley, Business Development Specialist, Small Business Development Center, OSU South Centers)
A business plan is a roadmap to how your business operates; or if you are a start-up, how you envision it to operate. If you are seeking financing, it is generally required that you develop a business plan to some degree. To what extent your plan is developed is typically driven by the amount of financing you are requesting, coupled with your financial history and how the funds will be used.
A business plan usually consists of an Executive Summary, a Business Description, and the 3 M’s – Money, Marketing, and Management.
The Executive Summary is just that a brief overview summarizing the entire plan including the compelling reason the business will succeed. If you are seeking financing, the summary also includes how much is needed for what and from where.
The Business Description describes why the company exists and its relevance in the industry. It also discusses the products or services you will offer and what sector of the industry you will serve (are you in wholesale, retail, etc.).
The 3 M’s – the Money Section (or Financial Section) is typically coupled with a financial projections model showing the cash flow projections, profit and loss statement and descriptions of how each is achieved. It is best to not only show these numbers but also discuss how you arrived at them. To demonstrate your accuracy, utilize figures from industry standards or factual numbers from your current business or a like business. This Section is also where you will discuss details about the break-even and ratio analysis as well as where needed funds will be obtained. You will also need to include your personal financial statement; since in most cases, the business is not the only thing lenders look at and a personal guarantee is required for financing.
The 3 M’s – the Marketing Section can be a plan all on its own as the information supplied in this section is possibly the most important. You may have the best product or service in town but if not marketed properly that product or service doesn’t matter. You will want to answer questions like: Who is your target customer? What is your competitive advantage? What is your strategy on positioning your product or service? What marketing mediums will serve your business best? What kind of marketing budget are you planning? How will you gauge if the type of marketing you are doing is working? All of these are some very in depth questions that call for some detailed and well thought out answers.
The 3 M’s – the Management Section is also very important; however, it may come a little easier to most as this is the area that most business owners already have intact. Although, there still needs to be some leg work done in developing resumes that show the experience of owners and managers. This section should also include an organizational chart showing who is responsible for what and how the decision making process flows: How many employees are needed? What skills do they need to possess? How is risk managed? What professional support is needed?
A well put-together business plan can better your chances of securing funding at a financial institution as well as lead your business to success.
Contact your local Small Business Development Center (SBDC) for more in depth assistance on developing a Business Plan.