Starting a Small Business
Part 1: Tips for Writing a Business Plan That Works
Whether you’re launching your own small business or purchasing an existing one, a well-written business plan is critical to your success. Not only does it define clear goals, but it also outlines why an investor or bank should lend you money and support your venture. Here are some tips to help you put together a compelling business plan.
Find a Mentor
If you’re starting a business for the first time, find a mentor who can help you navigate the entrepreneurial process. SCORE is a great resource. This network of free volunteer small business mentors can connect you with someone who can provide step-by-step guidance on starting your own small business and building a strong business plan. SCORE mentors are also familiar with Small Business Administration (SBA) lending options and the type of information a lender needs to see before they agree to provide funding.
Provide a Solid Background
A business plan should outline your company’s vision, strategy, and projections for the future. It should also include information about you. Lenders want to know who you are, what you’ve done, and what kind of business and industry experience you have. For example, if you’re planning to open a restaurant, it’s important to discuss your professional background in the food industry and how this expertise will help you run your business.
Conduct Market Research
Knowing the market is critical to the success of your business. The market analysis section of your business plan should include information about your target audience, industry, competition, and what differentiates your business from competitors. The SBA offers great information on what questions you should answer to give yourself (and your potential lender) a good sense of the marketplace.
Your market analysis should also detail the good, the bad, and the ugly. Don’t just outline the good things without addressing the challenges. What are the potential roadblocks? How risky is the business? Does it have longevity? Identifying your target market, knowing your customer pain points, isolating your realistic competitors, and outlining ways to address potential challenges takes thoughtful research and planning.
A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a great way to evaluate your position in the market. By determining where your business stands in these four areas, you can better understand its potential for success.
Include Financial Projections
When looking for someone to finance your business, accurate projections are essential. Avoid making unsubstantiated claims or broad statements. Incorporate realistic projections that can be supported with facts such as:
- Sales forecast
- Profit and loss projections
- Cash-flow statement
- Balance sheet
- Breakeven analysis
- Use of capital
After reading this section, a potential lender should understand the reasons for your financial projections and assess whether they seem realistic.
Describe Your Team
Investors and lenders will want to ensure your business has a qualified management team behind it. This section should outline who will be working with you, their roles and responsibilities, and previous experience. Include biographies and focus on explaining how these business partners are prepared to help your business succeed. You’ll also want to list the members for your professional/advisory team, including your:
- Insurance agent
- Other investors such as friends, family, etc.
A business plan is the foundation of your business. Not only does it show you have a clear roadmap for growth, but it also helps a lender find you the right loan program based on your industry, needs, and goals. Lastly, a business plan doesn’t need to look gorgeous. What potential lenders really care about is content that is fact-based, data driven, and carefully researched.
To discuss banking solutions for your business, please contact Jessica Butler, Business Banking Sales Manager, by phone at 410.266.3000 x6932 or email at [email protected].
Learn more about how Sandy Spring Bank supports businesses.
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