Royal Bank of Canada - Definitive Guides
Do I write business plan solely to obtain financing?
It’s a misconception that you write a business plan solely to obtain financing. The reason for writing a business plan is that it’s an important tool for the business owner.
What are the benefits of a good business plan?
A good business plan will have five benefits. One, it draws a clear picture of your business objectives. Two, it improves your understanding of your industry and business. Three, it examines your potential strengths and weaknesses. Four, it helps prospective investors or lenders better understand and evaluate your business. Five, it offers a chronology of events and financial milestones, against which you can compare your actual results.
What should a business plan include?
Be prepared to cover the following:
- Summary: The “big picture” of your business.
- Industry: Market conditions; consumer demand; analysis of the competition and trends.
- Services/products: What’s special or different about them?
- Management: Backgrounds, responsibilities and qualifications.
- Marketing: Your target market; how you’ll generate sales; your costs, pricing, and distribution and promotional plans.
- Capital equipment: How land/buildings/equipment is to be financed; why it’s vital to your success.
- Operations: Mechanics of your workflow, inventory, personnel requirements and production schedules.
- Financial plan: Profit and loss; balance sheets; projected income; sales and cash flow statements.
- Risks: Backup plans; worst-case scenarios; how you’ll avoid/minimize risks.
- Part of your planning should include approaching a bank, as early as possible in the life of the business, even if there’s no borrowing requirement at that moment.
Is developing a plan a one-time task and when do I need a new plan?
Developing a plan isn’t a one-time task. A company expansion, new products, a different marketing slant, increased competition – these all signal the need for a new plan.
Often, it can be easier to start up a business than it is to move up to the next level. As a business grows, entrepreneurs face constant challenges, such as the need to change roles. Instead of wearing many hats, as most entrepreneurs do when starting out, owners must identify the tasks that only they can do, and cultivate others to be the experts in particular areas of the business.
For a fast-growing operation, a staffing plan should go hand-in-hand with a business plan. What skills do you need as the business evolves? How will work be organized? How do staff measure up? What type of employees are needed to meet your goals?
Without careful management, growing businesses hit road bumps along the way. While revenues soar, cash flow might be starved, costs can overrun, staff can become overburdened, and quality can decline.
Businesses that plan for growth instead of just allowing it to happen end up adapting effectively to the changes that come their way.
Visit Royal Bank for more on getting your business off the ground and growing.