overview of the business plan
why should you got to the trouble of creating a written business plan? there are three major reasons
1. the process of putting a business plan together,including the thought you put in before beginning to write, it forces you to take an objective, critical unemotional look at your business project in its entirety
2. the finished product your business plan is an operating tool which ,if proprly used, will help you manage your business and work effectively toward its success
3. the completed business plan communicates your ideas to other and provides the basis for your financing proposal.
the importance of planning cannot be overemphasized. by taking an objective look at your business you can identify areas of weakness and strength, pinpoint needs you might otherwise overlook, spot opportunities early, and begin planning how you can best achieve your business goals. your business plan also helps you see problems before they grow large and helps you identify their sources thus suggesting ways to solve them. your business plan will even help you avoid some problems altogether. part one of this handbook has been designed with these consideration in mind. but you must do the work. a professionally prepared business plan won't do you any good if you don't thoroughly understand it. that level of understanding only comes from being involved from the very start. use your plan don't put it in the bottom drawer of your desk and forget it. going into business is rough over half of all new business fail within the first ten years. a major reason for failure is lake of planning the best way to enhance your planning. your business venture that is doomed to failure. if your proposed venture is marginal at best, the business plan will show you why and may help you avoid paying the high tuition of learning about business then to learn by experience what a business plan would have taught you at the cost of several hours of concentrated work finally, your business plan provides the information needed by otheres to evaluate your venture, especially business plan can quickly become a complete financing proposal that will meet the requirements of most lenders.
a brief note on financing :
most of the cash required to start a business is provided by the business principals themslves.however, you may need additional funds to launch your business or provide for its growhh once it gets started. outside funds come from selling a portion of the business to yourself or another person. the amount you have to sell to acquire the nedded funds reflects the amount of risk that the investon percecies. if your venture seems very risky, you may have to sell a substantial share . if it is not seen as very risky, you wont's have to give up as much ownership. hence it is greatly to you advantage to make the percived risk as low as possible and a business plan can do this. debt is a loan, usually from a bank, that the lender expects you to repay at some determinate time. the lender will ordinarily receive a return for the use of the funds in the form of interest. the interest rate reflects the lender's perceived risk. the higher the perceived risk. your plan must take into account the need to repay both principal and interest as agreed. this has far reaching effects on your profits and cash flow, so borrow with care. if you use an outside equity investor, you don't have to repay the funds, but you give up a share of ownership and will have to share decision making and profits. if the business grows to the point where you wish to sell out , the real cost of an equity investor can be far greater then interest on a loan.
if you use bank debt, you may find yourself subject to loan agreements that effectively complet you to share decision making with your creditors. for exampl, an agreement may lomit the amount of debt you can incur relative to the net worth of the business, which can force you to find new equity mony in order to grow. you will find that more advice on these kinds of concerns will be very helpful. your banker or accountant can provide this advice and in any case you should be in close communication with both your banker and your accountant as you plan your business.