Jim Gove, Saco & Biddeford Savings Institution
May 15, 2023
How to make a strong business plan for your small business
By Jim Gove, Saco & Biddeford Savings Institution
Entrepreneurs embark on business ownership with many challenges and daunting odds. The U.S. Bureau of Labor Statistics reports one in five new businesses fail in the first two years, 45% fail during the first five years and 65% during the first decade.
If a new business can survive for 15 years, it will be one of only 25% that make it that far. If you want your new, small business to make it to the 25% club it is best to have a well-prepared, realistic and flexible business plan.
Identify why you need a business plan
Business plans are living documents that should be used as soon as your doors open to compare actual to projected outcomes, be revised when market conditions change, be continued beyond the first few years, and house strategies for future growth. A strong business plan should act as a road map to guide a business to desired outcomes. For many small companies, there are unforeseen obstacles along the way. When a small business needs to pivot, the business plan is a tool that can help develop a measured response versus a quick fix. With today’s uncertain economic landscape, a business plan can also address potential, future scenarios that a business may face. Thinking ahead is important for your business. Your business plan is the keystone to that preparation.
Help with creating a business plan
There are many free online templates to create a business plan; however, there are also people who can help. Two prominent resources are the Maine Small Business Development Center (SBDC) network and/or SCORE. These groups provide free assistance with crafting a business plan. Another helpful resource for potential business owners is the U.S. Small Business Administration (SBA) website.
What you need to include
A business plan typically contains certain components such as company description, market analysis, organization and management, the service or product the business provides, marketing and sales, funding requests and financial projections. Depending on the type of business, additional components may be necessary to suit its requirements.
Most new small business ventures, commonly referred to as “start-ups,” need financing in addition to owner equity and/or investors. A strong business plan plays an important role for lenders when considering taking the risk to lend to a new business. The projections component is critical. Projections present the anticipated business cash flow that will be used to repay any loans needed to open and run a new business. Projections need to be supported by assumptions that describe how certain figures have been derived. For example, how have the annual revenues of the business been calculated, or how have expenses been estimated? In most instances the business plan should present three years of projected cash flow, broken down by month, to show any seasonality.
A strong business plan provides a new business with a critical tool for success and the potential to make it to the 25% club.
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