A business plan is a road map, plotting milestones that must be reached on the way to a destination. It should comprised several components, including financial statements on the business, financial statements on each owner, and projections and budget. Numbers should be based on actual historical figures from previous financial statements, along with what the owner wants and expects in the future.
In preparing a plan, owners should establish both short- and long-term goals that are realistic and attainable. Do you want sales to increase each year or remain even? What changes are expected that will affect financial performance?
Also consider the geographic and financial markets, any foreseeable changes that will impact the business either negatively or positively, and the competition.
Once the goals are set, outline the steps necessary to reach them and put them in writing. Include timetables if appropriate. Consider the outcome of reaching a goal to ensure the necessary support is in place. For example, if the goal is to increase sales by 25 percent, do you have sufficient sales and support staff to deal with clients once the increase is met?
Make projections based on the previous year's actual results, adjusted to reflect expected and desired outcomes. Make adjustments to areas of the business impacted by the results. For example, the goal of increasing sales by 25 percent would reflect not only an increase in sales, but also an increase in costs such as salaries and commissions, inventory, accounts receivable, accounts payable and various operating expenses.
It's helpful to complete several years of projections when planning for long-range goals. It may also be useful to run numbers for several scenarios.
Once the business plan is complete, it is essential that it not be filed away but actively used as a road map. Check off goals as they're reached, and review projections and compare them with actual numbers. Make changes to goals and projections as necessary.
Share the business plan with your banker, even if you're not in immediate need of financing. It is helpful for the banker to know where the owner wants to take the business, and what he or she needs to get there. The banker is then equipped to help when the time comes.
When used as a framework for the business owner to think about the business and its goals, a solid business plan can help ensure the business goes where he or she wants it to go. Jane Bittcher is vice president, Business Development Group for Fifth Third Bank. Reach her at (614) 233-4562 or firstname.lastname@example.org.