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The business plan outlines in specific terms the financial objectives of your business, and how it will position itself to achieve those goals in the context of the current market environment.
» MORE: Best loans for working capital [Back to top] Here, you’ll list your business’s legal structure — such as a sole proprietorship, partnership or corporation — as well as key employees, managers or other owners of the business.
It should also include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
You may also include ratios that highlight the financial health of your business, such as: [Back to top] This is a critical part of your business plan if you’re seeking financing or investors.
It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
“If you have no financial forecast, which is part of the business plan, it’s very difficult to show the bank how you are going to repay the loan,” Allen says. For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and increase its sales by 50% over the next three years.
[Back to top] This section provides a snapshot of your small business.A business plan typically looks out over three to five years, detailing all of your goals and how you plan to achieve them. If you’re looking for outside funding, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets.If you’re applying for a loan or looking for investors, a business plan shows you’re prepared and have fully vetted your business idea, says Craig Allen, a financial advisor who teaches business plan writing classes at Southern New Hampshire University. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.Your goals may be aggressive, but they should also be realistic.“It’s OK to be optimistic if you can justify it,” Allen says.[Back to top] If you’re a startup, you may not have much information on your business financials yet.However, if you’re an existing business seeking small-business loans, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.[Back to top] Now that you’ve written your business plan, here are some tips to help your hard work stand out: Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well.“If you walk in with a sales forecast 50% higher than other businesses, they are going to know that you are not being realistic, and that’s going to work against you.” Keep it concise: All you need is 15 to 25 pages for a good business plan, as long as the plan is clear, concise and contains all of the relevant information, Allen says.Focus on the key elements of your business plan and avoid getting too bogged down by the technical aspects of your business or using too much industry jargon.