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How to Write a Business Plan

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Lets You Improve Your Business Concept

Writing a plan allows you to see how changing parts of the plan increases profits or accomplishes other goals. You can tinker with individual parts of your business with no cash outlay. If you’re using a computer spreadsheet to make financial projections, you can try out different alternatives even more quickly. This ability to fine-tune your plans and business design increases your chances of success.

For example, let’s say that your idea is to start a business importing Korean leather jackets. Everything looks great on the first pass through your plan. Then you read an article about the declining exchange ratio of U.S. dollars to Korean currency. After doing some homework about exchange rate fluctuations, you decide to increase your profit margin on the jackets to cover anticipated declines in dollar purchasing power. This change shows you that your prices are still competitive with other jackets and that your average profits will increase. And you are now covered for any likely decline in exchange rates.

Improves Your Odds of Success

One way of looking at business is that it’s a gamble. You open or expand a business and gamble your and the bank’s or investor’s money. If you’re right, you make a profit and pay back the loans and everyone’s happy. But if your estimate is wrong, you and the bank or investors can lose money and experience the discomfort that comes from failure. (Of course, a bank probably is protected because it has title to the collateral you put up to get the loan. See Chapter 4 for a complete discussion.) Writing a business plan helps beat the odds. Most new, small businesses don’t last very long. And, most small businesses don’t have a business plan. Is that only a coincidence, or is there a connection between these two seemingly unconnected facts? My suggestion is this: Let someone else prove the connection wrong. Why not be prudent and improve your odds by writing a plan?

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Step-by-step advice on preparing a business plan

Raise money for your small business from lenders or investors — write the business plan and loan package necessary to finance your dream and make it work. With How to Write a Business Plan, you’ll learn how to:

  • find potential sources of financing
  • create profit and loss forecasts
  • put together a winning proposal and present it to lenders

Includes step-by-step instructions and forms to write a convincing business plan!

What is a Business Plan?

A business plan is a written statement that describes and analyzes your business and gives detailed projections about its future. A business plan also covers the financial aspects of starting or expanding your business—how much money you need and how you’ll pay it back.Writing a business plan is a lot of work. So why take the time to write one? The best answer is the wisdom gained by literally millions of business owners just like you. Almost without exception, each business owner with a plan is pleased she has one, and each owner without a plan wishes he had written one.

Why Write a Business Plan?

Here are some of the specific and immediate benefits you will derive from writing your business plan.

Helps You Get Money
Most lenders or investors require a written business plan before they will consider your proposal seriously. Even some landlords require a sound business plan before they will lease you space. Before making a commitment to you, they want to see that you have thought through critical issues facing you as a business owner and that you really understand your business. They also want to make sure your business has a good chance of succeeding. Inmyexperience,about35%to40%of the people currently in business do not know how money flows through their business. Writing a business plan with this book teaches you where money comes from and where it goes. Is it any wonder that your backers want to see your plan before they consider your financial request?
There are as many potential lenders and investors as there are prospective business owners. If you have a thoroughly thought-out business and financial plan that demonstrates a good likelihood of success and you are persistent, you will find the money you need. Of course, it may take longer than you expect and require more work than you expect, but you will ultimately be successful if you believe in your business.
Helps You Decide to Proceed or Stop
One major theme of the book may surprise you. It’s as simple as it is important. You, as the prospective business owner, are the most important person you must convince of the soundness of your proposal. There-fore, much of the work you are asked to do here serves a dual purpose. It is designed to provide answers to all the questions that prospective lenders and investors will ask. But it will also teach you how money flows through your business, what the strengths and weaknesses in your business concept are, and what your realistic chances of success are. The detailed planning process described in this book is not infallible—nothing is in a small business—but it should help you uncover and correct flaws in your business concept. If this analysis demonstrates that your idea won’t work, you’ll be able to avoid starting or expanding your business. This is extremely important. It should go without saying that a great many businesspeople owe their ultimate success to an earlier decision not to start a business with built-in problems.
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