Business Plan

A business plan describes a company's past and current operations, then demonstrates how the desired investment or loan will further the company's goals and reward the investor. In the search for equity financing, the business owner presents a plan that will almost be the sole basis for the investor's decision to grant a loan request.

One of the most important things you will do concerning your business is develop a business plan. If you are like most small/home-based businesses you will need capital for start-up costs. Banks and investment firms will need to know your financial history, as well as, information concerning whether your business has the potential to succeed and in turn prove to be a wise investment for them. A little planning will save you a lot of money down the road.

The following is a sample of a business plan outline. You may have to change it according to your specific business, but this will help you get started. It gives you an idea of what the potential investor will be looking for when your business plan is reviewed.

Business Plan Outline

I. Cover Letter

A. Dollar Amount Requested

B. Terms and Timing

C. Type and Price of Securities

II. Type of Business

A. Business Description

1. Name

2. Location

3. Product

4. Market and Competition

5. Management Skills

B. Business Goals

C. Summary of Financial Needs

D. Earnings Projections

III Market Analysis

A. Description of Total Market

B. Industry Trends

C. Target Market

D. Competition

IV Product(s) or Service(s)

A. Description of Product Line

B. Discuss any Patent, Copyrights, Legal, and Technical Considerations

V Marketing Strategy

A. Overall Strategy

B. Pricing Policy

C. Sales Terms

D. Method of Selling, Distributing, and Servicing Products

VI Management Plan

A. Form of Business

VII Financial Data

A. Financial History (five years to present)

(not applicable if new business)

B. Financial Projection

1. Profit and Loss Statements

2. Balance Sheets

3. Cash Flow Chart

4. Capital Expenses

5. Start-up/Expansion Costs

In summary, not all of these outline items will apply to your small/home-based business, but it does give you a good foundation for a business plan to submit to potential investors. Your business plan may be a lengthy, bound presentation or simply a one or two page plan to submit for a loan package. Always consider who your reader will be and gear your plan accordingly. A business plan is a flexible document and should change as your business grows.

Having a business plan gives your business credibility. It lets your potential investors, family, and friends know you have given this business venture some serious thought and are ready to make a commitment to its success.