Use a Business Plan to Get Funding

• By AllBusiness.com
• On 8:00 am EDT, Friday October 16, 2009

In the midst of the worst credit crunch in a generation, business owners need to pull out all the stops in their efforts to obtain financing for their companies.

Traditionally, preparing a business plan has been one of the prerequisites to getting business financing. Whether you're applying for a commercial loan or in search of venture capital or angel funding, lenders and investors will usually want to see a formal written business plan. How extensive this plan should be depends primarily on how much financing you're after and what type.

But all business plans should include a few basic elements, such as a description of your business, financial plan, analysis of your market, advertising and marketing plan, description of operations, and introduction to your management team. The entire plan should be summed up in a brief executive summary that's no more than one or two pages and gives readers a compelling overview of your business.

Here are a few suggestions to help guide you through each section of your plan:

• Business description: Of course, this should include details like your location, product or service, mission statement, and legal form of ownership. However, you should go beyond this and communicate your vision for the company as well. What's the big picture? How will your company and your product or service impact the market and make a difference? Where do you see the company several years from now?
• Financial plan: Your plan should include balance sheets, income statements, and cash flow statements from your past three years in business, as well as pro forma (or projected) statements for the next three years. You may want to enlist the help of an accountant or CPA in the preparation of this section. It's also important to include a page of assumptions upon which your projections are based.
• Market analysis: Include a detailed description of your target market and your industry in general. What's the profile of your ideal customer? Be as specific as you can. Some businesses think they can be all things to all people, but if yours is like most businesses, the more narrowly you can define your target market, the better. In other words take a rifle instead of a shotgun approach.
• Advertising and marketing plan: This should include everything you're doing (and plan on doing) to promote your company, as well as your sales and pricing strategies. Most important, what's your unique selling proposition, or USP? What is it about your company and/or your products or services that stand out from the competition? This section is also a good place to offer a description of your primary competitors.
• Description of operations: Describe in detail how you manufacture or produce the products you sell. What are your raw material and labor requirements? How stable is the market for them? How important is it that you own and operate the latest and most technologically advanced equipment? If yours is a service business, explain in detail the process behind your method of delivering services to your clients.
• Management team: Include detailed bios of all your executives and managers, starting with yourself. Concentrate on each person's experience as it relates to your business and industry. The strength of the leadership team is the most important factor in the success or failure of most businesses, so lenders and investors will pay especially close attention to this section.
• Executive summary: This may be the most important section of a business plan, because lenders and investors who aren't intrigued here probably won't even read the rest of the plan. As such, this section should be written last. Boil your entire business plan down to one or two pages, emphasizing the most compelling aspects of your company and stressing your USP. The rest of the plan should provide the supporting details and documentation to back up what is stated in the executive summary.

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