You're not alone.
Most entrepreneurs see writing a business plan as a gargantuan task – especially if they've never written one before.
Where do you start?
How do you calculate the financials?
How can you be sure you're not making a mistake?
And if you need a business plan for a bank loan, getting this document right is absolutely essential.
So here's what we recommend: simplify the planning process by breaking the work up into manageable, bite–sized steps. That way, you can focus on one section at a time to make sure it's accurate.
Here's a quick overview of the step–by–step process we guide entrepreneurs through when they sign up for LivePlan.
This is the core of your business plan. It should give loan officers a clear understanding of:
There are three key parts to this step:
Detail exactly what problem you are solving for your customers. How do their lives improve after you solve that “pain point” for them?
We recommend actually going out and chatting with your target audience first. That way, you can validate that you're solving a real problem for your potential customers.
Be sure to describe your solution in vivid detail. For example, if the problem is that parking downtown is expensive and hard to find, your solution might be a bike rental service with designated pickup and dropoff locations.
Who exactly are you selling to? And roughly how many of them are there?
This is crucial information for determining whether or not your business will succeed long–term. Never assume that your target market is “everyone.”
For example, it would be easy for a barber shop to target everyone who needs a haircut. But most likely, it will need to focus on a specific market segment to reach its full business potential. This might include catering to children and families, seniors or business professionals.
Who are your direct competitors? These are companies that provide similar solutions that aim to solve your customers' pain points.
Then outline what your competitive advantages are. Why should your target market choose you over the other products or services available?
Think you don't have any competition? Think again. Your customers are likely turning to an indirect competitor that is solving their problem with a different type of solution.
For example: A taco stand might compete directly with another taco stand, but indirectly with a nearby hot dog vendor.
This is where the action happens! Here you'll get into the details of how you'll take advantage of the opportunity you outlined in the previous section. This part demonstrates to banks that you have a strong plan to achieve success.
The three main components of this step include:
There can be a lot of moving parts to this one, depending on your business model.
But most importantly, you'll need to fully explain how you plan to reach your target market and convert those people into customers. A few example of what should be included:
This is the nuts and bolts of your business. It's especially important for brick–and–mortar companies that operate a storefront or have a warehouse.
You may want to explain why your location is important or detail how much space you have available. Plan to work at home? You can also cover your office space and any plans to move outside your house.
Any specialized software or equipment and tools should also be covered here.
Lenders and investors want to be confident that you know how to turn your business plans into financial success. That's where your milestones come in.
These are planned goals that help you progress your company. For example, if you're launching a new product your milestones may include completing prototypes and figuring out manufacturing.
Metrics are how you will gauge the success of your business. Do you want to generate a certain level of sales? Or keep costs at a certain level? Figuring out which metrics are most important and then tracking them is essential for growth.
This is the most crucial – and intimidating – part of any business plan for a bank loan. Your prospective lender will look especially close at this section to determine how likely your business is to succeed.
But the financial section doesn't have to be overwhelming, especially if you break the work into smaller pieces. Here are 3 items that your plan must have:
Simply put, this is your projections for your business finances. It gives you (and the bank) an idea of how much profit your company stands to make. Just a few items you'll need to include:
Exactly how will you use any investments, loans or other financing to grow your business? This might include paying for capital expenses like equipment or hiring personnel.
Also detail where all your financing is coming from. Lines of credit, loans or personal savings should be listed here.
Bankers will be giving this section a lot of attention. Here's what you'll need:
The Executive Summary is the first section of your business plan, but we recommend you tackle it last.
It's basically an introduction to your company, summarizing the main points of your plan. Keep it to just one or two pages and be as clear and concise as possible.
Think of it as a quick read designed to get the lender excited about your business.
Not everyone feels confident writing a business plan themselves, especially if it's needed to secure a bank loan.
And although you don't need an MBA to write one, getting your business plan right often does require quite a bit of work. So if you need help writing your plan, here are two options to consider: