Are you thinking about approaching a Bank for finance to support your business? If you haven’t already gone to see the Manager then you may not know that the first thing he will want to see is your Business Plan.

Perhaps you are not convinced that all the time and effort needed in preparing a plan is essential If so then here are the main benefits for both you and your business.

1. No matter how good a communicator you are, you will never be able to convey your vision for the business as successfully as a perfectly put together Business Plan. It provides a clear understanding as to what you want to achieve. It allows you to express your ideas in a clearer manner.

2. Too many times business owners try to sell their idea verbally and at the end of the interview with the Bank the Manager is none the wiser than he was at the start. I think you can guess the outcome of many of those requests!

3. A Business Plan will help convince both you and the Bank of the project’s feasibility and viability. There’s nothing like having all the facts in front of you to clarify the key issues

4. There’s no getting away from the fact that a business owner who plans ahead comes across as being more ambitious and more focused. A well prepared Business Plan demonstrates you have vision and that you know what you want

5. With numerous ideas floating around in your mind, the pitfalls or stumbling blocks to success are never that visible. A mind buzzing and full of ideas will rarely achieve clarity. A Business Plan forces you to put your ideas down in writing and in an orderly manner. The result of this could be you going in a completely different direction than you initially thought of, or even abandoning your idea altogether. Not a pleasant thought, but which would you prefer? The loss of your hard capital or the opportunity to re-think your idea?

6. It is an ideal tool to monitor progress against the objectives you have set yourself (we will cover objective setting later). By checking progress against your Plan, you will be able to spot if you are moving away from your original vision and so you will know what has to be put right

7. Imagine if you didn’t have this check in place; an unnoticed change in direction or a slippage in achieving your objectives, if left uncorrected for too long, could be fatal to your business. On the other hand, it may transpire that a shift from your original vision could be a better alternative, but at least recognising this change allows you to adjust your course in a planned, structured and controlled manner

8. Every action you take has a consequence, and a Plan helps make these consequences much clearer. Being aware of the possible effect of your chosen direction allows you to plan ahead, leaving you better able to cope with whatever the world of self employment can throw at you. This is one thing that “mental planning” would not achieve

9. Putting your thoughts on paper may make you realise that you need to do more research on the demand for your product or service. It could also highlight that more investigation on your competitor’s products or services is needed. Additional research could help avoid a potentially costly mistake or even uncover a hidden advantage, which you had not seen before!

10. A Plan will guide you as to how much money is needed to make an idea work. In your mind you may have a rough figure of what you’ll have to commit, but until you do a Cash Flow Forecast you may not realise that an overdraft limit will be required, in addition to a loan for your equipment. If the mention of preparing a Cash Flow Forecast brings you out in a sweat, don’t worry as later in the book I’ll be showing you exactly how to do one

11. A Business Plan will help you get funding. One of the main reasons Banks turn down requests for loans is a lack of information to assist in making an informed decision. If the Manager doesn’t have enough knowledge about your idea or business then he won’t feel comfortable enough to support you. He has to understand your business before he can say yes. Some time in the future he may have to justify to his superiors why he lent you the money, so he needs as much information as possible to back up his decision. A Business Plan will make him feel much more at ease and so more able to say yes

12. By the time you have finished writing your Business Plan you will have a total understanding of your business; its strengths and weaknesses, the environment it operates in, what could potentially go wrong, and what you can do to ensure your success. Doing your planning on the back of an envelope is not going to achieve this

You should realise by now that it’s essential to have a Business Plan; it could be the difference between success and that dreaded “f” word – failure! It’s all about understanding the importance of planning ahead.

Spend time putting your thoughts on paper in a structured and logical manner. It will pay you dividends, both in getting the Bank to take you seriously and securing the future of your business.

Robert Warlow
Small Business Success

Would it be fair to assume that the most important part of writing a business plan is to start by defining the health of the company’s future market? After all, why should anyone bother with a business plan if the current conditions in the market aren’t ideal? Better yet, isn’t it just better to understand whether that market will be around for the long-term? Answering these three questions starts with an understanding of the importance of performing a market assessment. An assessment aims to identify the market’s current path and to provide insight into any potential issues. Any entrepreneur must understand the current health of the market, the major players within the market and that market’s short-term, and long-term, growth potential. In this case, the assessment is the first step in terms of pursuing a new business venture. It outlines the current situation and provides guidance on how to proceed with entering the new industry. The entrepreneur must clearly define the conditions for business success by defining the industry’s current health. The market assessment helps to do just that.

Why do Entrepreneurs Fail to Review Their Market’s Health?

While it’s important for entrepreneurs to remain positive, it’s also equally important for them to be cognizant of what’s really happening. Unfortunately, most entrepreneurs forego the market analysis because they refuse to hear anything that might contradict their business strategy. In this case, they must come to see the assessment as an analysis into the market’s future and an essential first step towards business success.

That analysis will help identify any potential pitfalls and provide the new venture with the tools to improve its business plan. The assessment should define where the market is, where it’s going and what the new venture’s main competitors are. When writing a business plan, start with a thorough analysis of your future market. After all, there may be competing technologies that could make your new market obsolete. So what type of answers does a market assessment provide?

– Define the Short-Term and Long-Term Market Potential: The most important part of the analysis is to define the short-term and long-term potential of the market. Will the market grow over the next year? What are the 5, 10 and 15 year projections for the market? Defining the market’s growth potential is a vital part of any market analysis.

– Define the Product or Service’s Potential for Success: Will the new venture’s product and service offering be welcomed by customers, or will a vast majority shy away from what the company has to offer? A market assessment will help define the new business venture’s overall strategy because it will outline how companies are currently succeeding in the market. In essence, it will provide insight into what customers want and how they want it.

– Define the New Venture’s Competition: A market assessment should provide insight into the company’s future competitors. It should define how these competitors operate, how they sell, and most importantly, why their customers continue to buy from them.

– Define the Suppliers in the Market: Every company needs good suppliers. As such, identifying those key suppliers is of vital importance to controlling costs. What are the standard payment terms within the industry? Who are the best suppliers to work with? These are the types of questions that must be answered by the market assessment.

Take the time to perform a market assessment. It will address your biggest concerns, and provide guidance on how best to implement your business strategy. Most importantly, it will help you put together a more thorough business plan.

What kind of competition do you have for your donut business? How does your business and your product measure up to theirs? Evaluate what your competition does so you can copy what works for them and discard what does not. In other words, learn from those who are trying to get your customers. How do competitors define the product (donuts) in your area? How much market share does each have?

In the competitive analysis of your business plan you will want to look at donut businesses similar to yours including national chains that also operate storefront businesses. If you operate a trailer and move between fairs and festivals your competition is not necessarily other donut businesses (although those count too) but those next to you selling other vending items. Granted, it will be difficult to research these other businesses on wheels before hand. When you get to a fair and set up observe everything the other vendors do that attracts customers and everything they do that has no effect.

Also consider how likely other competitors may enter the market at a later date. Investors will want you to research how saturated the market is and what the barriers are to people who want to make donuts like you do. Do not let your emotion get in the way of your analysis. It is easy to assume that your product will be superior to everybody else’s, but there is much more to consider. Taste, size, price, and service are all important things to look at but are only part of the picture. Try to learn the internal business practices behind the scenes to gage the strength of your competition. Are they creative, motivated, and financially secure? Do they have high employee turnover? These are keys to success as well.

Investors do not want to know why you are a little bit better than the competition. They want to know why you are way better then the competition. Try to view your donut business through the eyes of a customer and if possible be a customer of other donut businesses to gather your information.