I am writing a business plan for a college class. Professor wants us to obtain information about demandfor service, economic growth in this area, and expected revenue generated in the first year. Can anyone help?
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As a lender, I wish we could approve every loan application that hit our table; unfortunately it’s not possible. We deal with mostly very small businesses seeking small loans, usually less than $250,000. Lending to inexperienced, new business owners is one of the riskiest arenas for a lending agency. Still, we manage to keep our losses to a minimum. The amazing thing about these business plan killers is that they rarely travel alone; they almost always appear in clusters. Here are the top ten business plan killers and what you can do to avoid or fix them:
1. Dreadful Personal Financial Profile
What is the likelihood that one who demonstrates abysmal financial management in his or her personal affairs will miraculously become an effective manager of finances for a business? It’s highly unlikely. It’s a lot more likely that poor practices in one’s personal situation are simply carried into the business. The main difference is that in business a much broader range of people and organizations usually get burned as a result of mismanaged business finances. Red flags pop up in business plans in the form of high credit card financing, garages full of toys (trucks, Seadoos, Skidoos, bikes, boats) 90% financed, poor credit history and no savings.
Strategy One: Tidy up your personal finances before applying for a business loan. Pay down loans, clean up any bad debts, collect some business-related equipment and save some money.
2. Insufficient or Non-Existent Owner Equity or Security
Business is always risky, but new business is infinitely more so. Lenders will want to see you personally “invested” in your business. The part of the business you personally own is called your equity. Another way to describe equity is the amount of cash or equipment you put into the business. A lender wants to see that you are invested to the point that you will not be inclined to walk away when the going gets tough. How much owner equity is enough? The amount varies from lender to lender, but less than 10% is inviting scrutiny while 20% or more will make your proposition more enticing. Any savvy lender will insist on seeing you invested to the degree that any financial complications result in you, not them, laying awake nights stressing over how to pay the bills. Security is the surly sister of equity. Your loan application will be stronger if you bring some sort of asset to the table as security. Lenders will be more attracted to assets with a clear resale value of more than the loan. Inventory is usually less desirable because it tends to grow legs and disappear when the going gets tough.
Strategy Two: Create some equity to bring to the table. Save money, sell some toys, borrow some love money, or get a second job for a while.
3. Inadequate Market Research
Inadequate market research manifests itself in various cruel ways. It can surface in the business plan as an unconvincing business case. It can reveal itself in the form of too much secondary information (from other sources) and not enough primary market research (that which you gather yourself). Lack of market research can lead to a business plan that is too general – not specific enough. Perhaps one of the most common and perplexing indicators is that the entrepreneur has not talked to or listened to the potential customers. A lender will want to see that you have “turned over all the rocks” in search of knowledge about your business. After reading your business plan, if I feel that I know more about your business than you do, I will not be inspired to approve your loan.
Strategy Three: Prove your business case to yourself and to your reader. Persist in your market research efforts until you become “the expert” for your business. You will feel more confident and have an easier time convincing your readers that you know what you are doing.
4. Transmitting and Not Receiving
It’s your responsibility to find that elusive balance between being bullheaded enough to bulldoze your way to success, yet sensitive enough to receive critical information. Your ability to listen to your clients is the key to your success in business. Falling in love with your business idea at the high cost of closing your ears to input will not help you acquire a loan. Business analysts, bankers and customers vote with their money. They have no need to yell at you to get their points across. It’s important to listen attentively when they speak at normal volumes.
Strategy Four: Listen and learn. Listen to those who agree with you AND to those who do not. Listen to all who shoot holes in your business idea, they might just be pointing you toward success. When you think you’ve heard it all, listen harder!
5. Dishonesty, Discrepancies, Inconsistencies One sure way to cheat yourself out of a loan is to give the appearance, intentionally or accidentally, that you are anything less than above board. Any form of dishonesty in your business plan, or during your dealings with the targeted lending agency staff, is a sure way to have your application rejected. Blatant untruths are the more obvious offence, but it is entirely possible to communication underhandedness in other ways. For example, missing or inaccurate information invites questions and sends the wrong message. Conveniently leaving out some of the less obvious, non-flattering financial information (like unpaid long overdue taxes) is a sure way to a “NO”.
Strategy Five: Be honest, thorough, and accurate.
6. Not Answering the Key Business Questions Clearly
Your business plan is a tool for communicating with others. What is your product or service? Who are your customers? How will you market and distribute your product or service to your customers? Will you make money? Will your business be able to repay the loan? Does your plan communicate these things clearly?
Strategy Six: Answer the basic business questions. Who, what, where, why, when, how. There are many business planning systems (although none surpass the Roadmap!) that will provide a framework to keep you on track. A proper business planning system will provide you with a framework in which to place the assortment of information you will gather. Choose a system and use it.
7. Shoddy Presentation
You can do the best market research on the planet, but if you can’t communicate it clearly and package your business plan professionally, your target audience might not even read it.
Strategy Seven: Provide a professional presentation. Ask a friend or pay someone to proof, get someone to keypunch the plan if you need to, but do a professional job. Demonstrate that you care and you will increase your odds with the lender.
8. Pie-In-The-Sky
Inflated, over optimistic sales forecasts or cash flow projections will derail your loan application every time. A future too bright will blind the lenders and scare them off the loan.
Strategy Eight: Be realistic in your expectations, even if you believe you will be floating on a sea of cash within months. No matter how lofty your financial aspirations might be, know that businesses are usually not profitable for the first while. Estimate your sales conservatively and your expenses a bit higher than you think they will be. Keep that cash flow realistic and be sure to include ALL expenses.
9. Fish-Out-Of-Water Syndrome
This is what happens when someone tries to get into a business they know nothing about. It becomes evident when the owner background reveals that the applicant has no prior experience in the area of expertise that is the main focus of the business. For example, a heavy-duty mechanic might seek to start a small restaurant. Not an impossible leap, just risky.
Strategy Nine: Know your business. It is so important to have a base of knowledge about your business and experience where possible. Many successful businesses arise from disgruntled or displaced employees who feel they can do as good as or better than their employer. Enhance this background experience with solid market research, the Internet, courses, books, tapes, and trade publications. Knowing your business will increase your confidence and enhance your loan options.
10. Too Little Too Late
This point pertains to existing businesses in search of financial assistance after things have already gone sideways. Too often we see the application when the accounts receivable is out of control or major suppliers have already been hung out too long for scary large sums of money. Other aspects of this condition are collectors hot on the trail and long overdue taxes. It’s really difficult to get excited about loaning money to pay for bills that should already have been paid.
Strategy Ten: Be decisive when your business gets into rough financial waters. Make the tough decisions early and then act on them quickly. If your recovery plan involves a loan, you are far stronger coming to the table early with a well thought out plan, than later with a plea for assistance to pay back taxes.
Dan Boudreau makes business planning achievable, fast and fun. Want to learn more about how to do your own business plan? Subscribe to the RiskBuster Newsletter and instantly download a free copy of Dan’s popular fast-track business plan template
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Don?t even consider the possibility to open a dollar store without having a complete dollar store business plan in-hand. There are many ways to create your plan. No matter what you choose, be sure you are part of the process. Your thoughts, ideas, plans, and vision for your business are in integral part of your plan. Business plan development strategy #1 is to create the plan yourself. But what if you are either too busy, or feel you don?t have the ability to create a plan of your own? What do you do in those cases? For many the answer is to leave the idea of a business plan by the wayside. They make the mistake of moving forward without a plan. They risk the success of their business with this decision. For many the consequences of their decision will be reflected in the sales and dollar store profit level of their business.
If you are about to open a dollar store but don?t have the knowledge regarding developing a dollar store business plan, then strategy #2 is to consider using a business plan software program. There are many available. Most are extremely user-friendly and even provide examples for the various sections. Be sure your computer can handle the software requirements. Many of these programs will walk you through a set of questions about your business. As you answer the questions a unique business plan is being developed for you. The downsides in many cases include cost and time required. There is also the fact that the final product is only as good as the information and data you input.
Strategy #3 is to purchase a generic pre-written business plan. There are many of these on the market, including some written as a dollar store business plan. Many are written so you can edit in your business name and other basic information. The obvious downside to these generic plans, even when they are dollar store business plan formats is they often don?t really end up being unique. They fail to provide the unique story you want to tell for you business. They do however provide a business plan to use when you open a dollar store.
The final strategy to be covered in this article is hiring a business plan writer to create a unique dollar store business plan for you and your business. There are many seasoned experts just waiting to help you through the process of creating your own business plan. While some writers can be fairly costly, there are many with great credentials and fair prices.
When you open a dollar store it is important to have a unique dollar store business plan. No matter what option you select for developing your business plan be sure you invest the time to really think about what you want you business to be now and in the future. Make it your own by incorporating your values, vision, thoughts and ideas into the plan.
To your dollar store success!
Want the best ideas to earn from your dollar store business? Check out “Tactics to Add Streams of Income to Your Dollar Store Business” at www.OpeningADollarStore.com.
Bob Hamilton is an entrepreneur, author, writer,
business consultant and trainer.
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what are some managerial tools that the entrepreneur can use in the business planning process, which he can later use in his management and operations?
What is a Business Plan?
You can pretty much define a business plan as a resume for your business idea in mind. Some may say it?s like your company?s calling card. When you need money to start your business, or when you need an office space, your business plan is what will do most of the talking to convince your investors / lenders or property managers to believe in your business and give you what you need.
Why is it important to have a Business Plan?
The time that you spend on writing a solid business plan will pay for itself in corporate strategic and tactical clarity as your business grows. A solid business plan: (not in particular order)
No businesses are the same, and no business plans are the same. Your business plan is like your business blueprint; it should be unique. While it is important to be able to illustrate your business concept well enough for others to understand what you hope to be doing, the business plan is essential for your own use. It is about the process of developing the business plan; the process helps you to focus on exactly what you are trying to achieve. It will give you a lot more clear vision of the entire structure of your business as you develop your business plan through detailed research and planning.
A business plan consists of the following parts:
Executive Summary
Business Description
Market Strategies
Competitive Analysis
Design and Development Plan
Operations and Management Plan
Financial Statements
Aaron Lee
Business Growth Strategist
The Entrepreneur Journey of a Business Minder
For the summer my friend and I want to start our own business planning birthday parties for pre-teens, younger teens and young kids. We’re 16 years old and we thought it would be a good idea because it was different and many parents who try and plan their childs party dont even know what their kid likes. I want to know how should I get started and how much I should charge? Any tips here would help.
I have helped quite a bit of users here on business planning, some financial stuff and business in general, but what comes to mind is how much time and energy people actually put into planning?
Do you feel that if you should plan better you are more likely to succeed?