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NEWS - PLANNING
A good business plan can be vital
5/30/2001
Some small businesses are required to draw up a business plan as a necessary evil if they want to solicit funding from banks, venture capitalists or other potential financial backers.
But business plans are not just about trying to convince lenders or investors to support you but also about learning whether you fully understand where your business is going and how it is going to get there.
A proper business plan is, therefore, not only a selling tool but also an important management tool that can help you analyse your business by identifying its strengths and/or weaknesses and determining whether your financial or marketing assumptions are realistic.
So what should a business plan contain and how detailed should it be? This depends on the nature, maturity and size of your business and what sort of funding you want.
A start-up company seeking $200,000 in seed capital for research into a new technology will not be expected to provide as comprehensive a plan as a manufacturing company seeking to borrow $5 million.
But business plans generally should provide information about strategy, management, products or services, target market and competition.
Financial information such as balance sheets and cash flow statements, historical and projected, should be included, along with specific details about exactly why you need the money and how you intend to spend it.
Consultancy firm Deloitte Touche Tohmatsu says to get the attention of potential lenders, investors or partners a business plan needs to answer questions such as the following:
• Is the business concept solid and feasible? Can it be implemented in a reasonable time-frame?
• Is your product or service viable?
• Are your strategies consistent with your evaluation of the marketplace and your capabilities?
• Have you thoroughly evaluated different strategies? Can you defend your choices among the alternatives identified? What are the target markets and are they large enough to support the business plan?
• Have you thoroughly and honestly evaluated your competition?
• Are your goals focused, tied to the strategy, measurable, specific, and understandable?
• Is the financial plan realistic? Does the funding request match the investors' criteria?
• Is the management experienced and capable? And do you have a detailed and realistic timetable and set of reliable benchmarks to measure progress?
If you are a fledgling technology company, you should remember your business plan is not a research grant application, advises Xcelerator, a biotechnology incubator.
One should keep the focus on the business opportunity rather than the miracle technology. Investors want to know how you and your team intend to turn that product into a profitable long-term business. Show that the your plan is based on market pull rather than technology push.
For start-up companies, especially in technology, the section of their business plan dealing with founders and the management team is extremely important as venture or seed capitalists are effectively being asked to pin their faith in the people running the company.
The business plan should include details about their background, accomplishments, reputations and level of commitment. It should also say who else needs to be on the team.
Of course, even for more established companies potential backers and investors will use the management team as a guide to the likely success of a business.
Small businesses needing help for a business plan may decide to seek direct professional advice from financial institutions or consultants.
Another option is software and other products that can help draw up a plan. The Commonwealth Bank, for example, offers a BetterBUSINESS-planner software package that provides an easy guide.
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