Three More Reasons To Write A Business Plan To Recession Proof Your Business
So you think you can just go on endlessly flying by the seat of your pants with your business? Sure I can, you say, Ive been working successfully this way since we started! Yes, but if you want to grow to the next level, you will need to plan.
Every business should have a basic business plan not the 1,000 book that most seek for financing, but one you can actually use to map out your strategy and the plan to get from where you are to where you want to go, numbers and all. It's the road map to success.
On the other hand, if you do seek financing, a partner/investor or want to sell, you MUST have a full business plan. Heres why:
IF YOU NEED BANK FINANCING
This plan is used to inspire confidence in your banker and convince her/him that your business is a good credit risk. It is written very logically, with an emphasis on the financial projections and presentation of historical financial results. Bankers who make bad loans get fired, so they like to err on the side of caution. A banker is looking for safety and a demonstration that the company can generate sufficient cash flow to pay the interest and the principal. Bankers are not looking for a huge return on their money. They don't want to take part in the management of your company or sit on the board of directors. Your business plan will need answers to these questions:
Will the company's cash flow be stable enough to make the payments on the loan?
Are the long term prospects of the business favorable?
Does the company have a reasonably good track record?
IF YOU NEED AN INVESTOR/PARTNER
The plan must demonstrate considerable upside potential for the business. The banker was content to get his money back plus, say 10% interest. The investor may want a return of 30% to 50% or more. This plan must be written in an interesting manner and keep the reader's attention. Your business plan is competing with all the other plans submitted to the investor. Make sure you address the following questions:
Can the company grow rapidly?
Are the margins attractive?
Have you succeeded in other business ventures?
Is this a market that is emerging, with a large and bright future?
How much of the company are you willing to give up, both in equity and management control?
IF YOU WANT TO SELL YOUR BUSINESS
You must prove to a potential buyer that your company is worth paying a premium for. Sometimes this can be called a marketing presentation, offering memorandum, or valuation. It is not strictly a valuation, as you are trying to establish your sales price for the business, not determine a value. Usually a valuation is completed by an objective third party. You're likely to be asked:
Is there untapped potential for the business that a new owner could take advantage of?
If the new owner had more capital, could the business grow more rapidly?
Are there new markets that could be entered?
Could costs be reduced and therefore profits increased?
Whatever your reason, if you want to grow your business, you need a solid business plan.
Every business should have a basic business plan not the 1,000 book that most seek for financing, but one you can actually use to map out your strategy and the plan to get from where you are to where you want to go, numbers and all. It's the road map to success.
On the other hand, if you do seek financing, a partner/investor or want to sell, you MUST have a full business plan. Heres why:
IF YOU NEED BANK FINANCING
This plan is used to inspire confidence in your banker and convince her/him that your business is a good credit risk. It is written very logically, with an emphasis on the financial projections and presentation of historical financial results. Bankers who make bad loans get fired, so they like to err on the side of caution. A banker is looking for safety and a demonstration that the company can generate sufficient cash flow to pay the interest and the principal. Bankers are not looking for a huge return on their money. They don't want to take part in the management of your company or sit on the board of directors. Your business plan will need answers to these questions:
Will the company's cash flow be stable enough to make the payments on the loan?
Are the long term prospects of the business favorable?
Does the company have a reasonably good track record?
IF YOU NEED AN INVESTOR/PARTNER
The plan must demonstrate considerable upside potential for the business. The banker was content to get his money back plus, say 10% interest. The investor may want a return of 30% to 50% or more. This plan must be written in an interesting manner and keep the reader's attention. Your business plan is competing with all the other plans submitted to the investor. Make sure you address the following questions:
Can the company grow rapidly?
Are the margins attractive?
Have you succeeded in other business ventures?
Is this a market that is emerging, with a large and bright future?
How much of the company are you willing to give up, both in equity and management control?
IF YOU WANT TO SELL YOUR BUSINESS
You must prove to a potential buyer that your company is worth paying a premium for. Sometimes this can be called a marketing presentation, offering memorandum, or valuation. It is not strictly a valuation, as you are trying to establish your sales price for the business, not determine a value. Usually a valuation is completed by an objective third party. You're likely to be asked:
Is there untapped potential for the business that a new owner could take advantage of?
If the new owner had more capital, could the business grow more rapidly?
Are there new markets that could be entered?
Could costs be reduced and therefore profits increased?
Whatever your reason, if you want to grow your business, you need a solid business plan.
