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Starting
a business plan
Dear Small Biz
Adviser:
My son and I wish to purchase an existing business, and I desperately
need to write a good business plan to take to our potential lenders.
I think I can write one, but I need a structured outline to go by.
Something with a little narrative with each section to get me started.
We both have experience in the business we wish to purchase, but
will need capital to grow the business; our credit is good but our
cash situation is poor. Any advice is appreciated.
Thank you,
E.L.
Dear E.L.:
As a small-business consultant spanning over 25 years, I can tell
you there is no better planning tool for starting, expanding or
reorganizing a venture than the business plan. I have assisted the
development of hundreds of these documents over the years and have
personally written more than 20 such documents in the last three
years. No venture capitalist or commercial lender is going to consider
any funding until you deliver a business plan, and it must be well
developed to receive any serious consideration.
Many venture capitalists learned
firsthand during the dot-com fiasco of 2000 that investors must
choose sound business proposals to back. Now they have adopted the
hard-line
approach historic in the banking industry.
Keep that in mind as you seek a
lender or investors. I hope that your business purchase includes
the operation's fixed, tangible assets. As for your level of investment,
expect to capitalize 30 percent or more of the cost. If that exceeds
your cash reserves, you may need to consider a loan against the
equity in the residence. That is a very common source of startup
funds.
Business plan components
Now to creation of your business plan. This document is not simply
a collection of sheets of paper with words that you need to qualify
for a business loan. It contains tools designed to:
- Determine, first and foremost, if the venture is
feasible. (Is there definitely a market in which to sell your
products or services and make a profit?)
- Determine the size of your market and how much
revenue you can generate.
- Develop an operational plan that will insure providing
the best of product or service and customer service to your intended
clients. (Don't buy too much equipment or hire too many people.
On the other hand, don't be without the equipment and staff sufficient
to be competitive and profitable.)
- Develop a set of financial projections that serve
as tools to measure if you are meeting sales goals, controlling
expenses and reaching acceptable profit margins.
As for which format to use in detailing
these components, you have many sources from which to choose. A
good first step is to review sample business plan outlines available
over the Internet.
-
CCH
Business Owner's Toolkit is a favorite with me. It includes
sample outlines and other issues you want to address when planning
this process and the startup of your venture.
- PriceWaterhouseCoopers'
VisionToReality
is another excellent site. You can even download the information
to your hard drive in PDF format. Like CCH, this site also addresses
critical startup issues often overlooked by the entrepreneur.
-
British Columbia Business Services Society offers up another
equally informative site, like the ones noted above, that is very
comprehensive, even to the U.S. entrepreneur. Likewise, it offers
information in PDF format for download.
- The
Small Business Administration's Business Plan Outline is concise
but not brief. However, it is so easily understood and covers
all of the type of information you'll have to submit to a commercial
lender. You can download the outline if the scrolling process
becomes taxing.
Once you get a general idea of
a good business plan, visit the business section of comprehensive
bookstores. There are many good books out there.
Anatomy of a Business Plan has a very straightforward,
easily understood approach to describing the details of a business
plan and is a favorite with the Small Business Administration.
The Successful Business Plan: Secrets and Strategies
is very detailed, with plenty of worksheets to guide you through
the basics. I highly recommend this publication for entrepreneurs
seeking to develop a business plan addressing venture capital return
on investment options.
If you feel comfortable using computer
software, there are plenty of business plans available in this format:
-
Business Plan Pro by Palo Alto Software is recognized as the
highest selling application of its kind in the world. It offers
templates, and the process includes easily understood audio and
written explanations for each step of the process.
-
JIAN's
BizPlan Builder is a favorite with those who have difficulty
laboring over the text of the plan. This application offers a
fill-in-the-blanks format, as well as details the step-by-step
process with templates.
-
Business Plan Deluxe is of British origin and described by
its advocates as easy to implement and inexpensive.
- Lesser known, but endorsed by the SBA, is
Ultimate
Business Planner, which claims to be the fastest and easiest
to use.
Research each of these products
to decide which would be best for you. View the Web sites of the
software providers for a diverse selection of templates for various
types of businesses.
I wish you and your son the best.
-- Posted: Jan. 2, 2003
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