| In your hurry to get your new business started, you | | | | even no more funding until you can prove your |
| may wonder if it is really necessary to begin your | | | | business is on its way to profitability. |
| business venture with a business plan. | | | | Normally, any business can to take three to five years |
| Not only is it important for you to have a plan when | | | | to become profitable. However, if you're showing no |
| you begin your business. It's equally important to have | | | | improvement, a lender will be legitimately concerned. |
| a yearly plan for your business so that you can see | | | | As you enter your second year of operation, you |
| what progress you have made, what your needs for | | | | should be showing less loss and more profit, even if |
| capital (read money) will be, and where you anticipate | | | | you don't yet show a net gain in income. Even if you're |
| your money will be spent during the coming year. You | | | | not looking for additional funding, you still need to take |
| need to show yourself, and if you borrowed money, | | | | this as a warning and start making necessary changes |
| your lender how far you have progressed since your | | | | so that you can make your business what you |
| original plan was written. | | | | originally intended it to be. |
| A new business writes a business plan in order to | | | | Are your prices are too low? Are your expenses to |
| show their lender how they intend to operate, and to | | | | high for the amount of business you are generating? If |
| provide information to them that supports their need | | | | so, what needs to be cut? For example, if you are |
| for start up funding for any other operations. In most | | | | selling products from a website, surf the web to |
| cases, a bank wants to see a three to five year | | | | determine what others are charging for the same type |
| projections showing how you plan to use the funding. | | | | of products. (I submit that you should have been doing |
| Depending on the scope of the business, they may be | | | | that from the beginning.) See if you are in line with your |
| willing to only finance the first year, and will want | | | | industry's standards for pricing. If you sell services, |
| additional evidence that your business is progressing | | | | explore what others are charging for the same |
| as outlined in the original business plan before they will | | | | service and adjust your prices as much as you can. If |
| advance any more funds. | | | | people are going elsewhere for the same service, they |
| In the beginning, because you are not able to really | | | | may be doing so because you prices are to high or |
| show much in the way of financial records, a business | | | | your quality is to low. In reality, these should have been |
| plan shows potential creditors what you anticipate for | | | | checked first, but some people in their haste to begin a |
| the future of your business. At the end of each year | | | | business forget the most important step of price |
| they can then compare it to your original projections to | | | | comparison. |
| verify if you are moving along as you anticipated. No | | | | Which ever the case may be, a business plan must be |
| lender wants to be stuck with an uncollectible loan | | | | reviewed and renewed every year. It is the business |
| because they advanced funds to a business with no | | | | plan that keeps you business moving in the right |
| real potential for success. Even if you are a little behind | | | | direction. It also determines where you are going. A |
| your original projections, they will be able to see if there | | | | very smart businessman, the president of Apple USA |
| is the potential for improvement. A lender may even | | | | when I first started working there, once told me, "If you |
| make suggestions for helping you reach your original | | | | don't know where you're going, it really doesn't matter |
| goals. On the other hand, if your progress is very far | | | | what direction you go." We were both sailors, and I |
| off you original projections, it could be a sign that your | | | | knew exactly what he meant. |
| business is failing. It's very likely you will receive less or | | | | |