You may ask, “Why write a business plan?” Well the answer is, “If you know where you are going you have a much better chance of getting there.”
There are two main reasons why a home business owner might want a Business Plan and they are:
- To have a clear defined focus on what their business is about
- To give a lender confidence that the owner knows what they are doing, what they are going sell, how they are going to go about it, knows about their competition, has planned their marketing and other details that are in the plan
As we know being in business is harder today than it ever has been so the person who has given fore thought to their business is going to be the winner.
As well as that if that person wants to borrow money then they have a much greater chance of getting it if the lender can see that this is not going to be a fly-by-night business but one that has had a lot of planning and research given to it.
A very high percentage of small businesses fail in the first 5 years and usually it comes down to lack of planning and/or lack of finance.
To convince a lender to give you money you need to be able to prove to them that you know what you are doing and what you plan to do in the next 5 years.
The Reason For Doing A Business Plan
When you have done your plan you should know the answers to all these queries:
– what is your proposed business all about
– how well do you know your intended business
– what business structure you will use
– your finance situation
– what budget you are going to work to and who will do your bookkeeping
– who your competition is and what they are doing
You also:
– know the legal obligations of the business
– have a marketing plan
– have a rough guideline for the next 5 years
– have worked out how you can pay back any monies that you borrow.
I am sure you can see from this list that there is a lot to consider when making up a business plan and you can also see why a lender would want you to have one if you are planning on starting a small business on their money.
A marketing plan is also a very important one to have made up and you should take a copy of the Marketing Plan with you when you approach your lender so that, one you are going to market, and two, how you are going to go about it.
To sum up, before committing yourself to anything in your small home based business you should put a Business Plan and Marketing Plan together for your own benefit and for the benefit of a lender and any possible future partner or landlord if you decide to take the business away from home.