“If you fail to plan, you are planning to fail.” Benjamin Franklin
Business plans are important for a variety of reasons. They provide valuable information about the business idea for potential investors or lenders, but they can also provide guidance to management as to the goals of the company. Additionally, business plans can be used to secure better payment terms from suppliers. For example, your client would probably benefit from being able to receive supplies and pay for them later. Sometimes they can negotiate terms that will extend payment until a later time, such as net 30 (must pay within 30 days), or net 90 (must pay within 90 days.)
Keeping our focus on using the business plan to raise capital, 📖 take a look at the SBA page. Business plans can take a long time to write, and some believe that it is better not to write one. See Eric Ries, The Lean Startup. (A note that Eric does not believe free-wheeling with no plan is the answer, but he does not believe time spent on a formal business plan is always in the entrepreneur’s best interests in the early stages.)
It is unlikely that your client will be able to secure financing or a loan without some form of a plan, or at least have the information that goes into a plan at their fingertips. The plan can be either traditional, which in my experience is what many VCs and angel investors want to see, or lean. Traditional business plans provide more detail, and it is often good for your client to think through things in detail as much as possible. In a lean plan, the details are substituted for summaries.
Regardless, what are the parts of a typical business plan?
- Executive Summary
- Description of the Business
- Marketing & Sales
- Product Design & Development
- Financial Information & Projections
- Financing Needed
When writing the business plan, your client should keep in mind who the audience is and what the client is seeking. The entrepreneur knows the business best so should write the business plan. I considered my job as one to support the entrepreneur while they were working on the business plan, be sure they’ve covered everything, and maybe polish it to make it more professional if necessary. There are plenty of online templates and the entrepreneur should also seek out their local SBDC for help. Review the SBDC’s page on business plans. 💡 Review this Agricultural Consultants business plan template. Be prepared to discuss your thoughts including any critiques you may have.