A Business Plan is Not Just For Your Bank. It’s For You Too
By Amy Lou Blunt, Chief Credit Officer
Creating a business plan is not just one of those tedious tasks to throw together a lengthy document that is solely for the purpose of ticking another box off a lender’s checklist. A business plan will serve as your guidepost, your foundation, your mandate for conducting your business, and it should clearly communicate those crucial elements to those within your organization, as well as those outside.
The process is critically important for companies in all stages, from start-ups to mature businesses considering expansion, acquisition of another company, moving to a new location, or purchasing more equipment.
A business plan should include these core elements:
- Management experience – I can say from personal experience, this is the area I believe has priority over others. Do the owners and the managers have the right experience, motivation and tenacity to make the enterprise successful? Relevant experience is more critical than a lengthy resume in an unrelated field. Is there sufficient financial oversight, and sufficient exposure to the business to afford some assurance the projections have a sound basis in their development?
- Projections – While we are on the subject, the performance projections are important, as are the assumptions behind the projections. As the saying goes, “Everyone makes money in Excel.” Virtually all bankers have received projections that show revenues sky rocketing in years 1-2, and profitability right out of the gate. Be realistic in developing your projections. If the purpose is solely to illustrate the ability to service debt rather than a meaningful representation of your business model, you are doing yourself a disservice and missing a golden opportunity to fine tune your business model.
- Marketing – Your marketing strategy should be detailed, including the need for your product or service, who you will target and what methods will you use to communicate your message. Those details will serve you far greater than merely stating the size of the nationwide or international market, and the percentage you expect to reach.
A well thought out plan that demonstrates your ability to create cash flow to continue to support your enterprise, as well as repay bank debt, will be a useful tool in obtaining bank financing and achieving ultimate success.