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It’s important to have a business plan for your business each
year so that you can see what your needs are for the coming year
and to show yourself and the bank how far you have progressed
since your original business plan was written. A new business
writes a business plan in order to show their intentions to
operate and to provide information to financial institutions in
support of start up capital and funding for other operations. In
most cases, the banks want to see three to five year projections
showing your intention for the funding. Depending on the scope
of the business, they may only finance the first year, and will
want additional proof that the business is progressing along the
terms of the original business plan before they will advance any
more funds.
Since you are not able to really show much in the way of
financial records, having a business plan also shows potential
creditors what you anticipate for the future of your business.
They can then compare this to your original plan to verify if
you are moving along as planned. They do not want to be stuck
with an uncollectible loan by advancing funds to a business that
has no potential of becoming successful. Even if you are a
little behind your original projections, they are able to see if
the potential is there for improvement, and may even make
suggestions for helping you reach your original goals. On the
other hand, if your progress is way behind original projections,
that can be a sign that your business is failing, so it’s likely
that you will not receive any more funding until you can prove
the business is on its way to profitability.
It’s normal for any business to take three to five years to
turn a profit, but if you aren’t showing improvement, that is an
area for concern. As you enter into your second year, you should
be showing less of a loss and more of a profit even if you don’t
yet show a net gain in income. Even if you aren’t looking for
additional funding, you should look at this as a warning sign
and start making some changes so that you can your business what
you originally intended. It may mean your prices are too low, or
your expenses are excessive for the amount of business you have
and need to be cut. For instance, if you are selling products
from a website, investigate what others are charging for the
same type of items to see if you are in line with the industry
standard in pricing. If you sell services, find out what others
are charging for the same service and maybe your prices are too
high, and thus people are going elsewhere for the same service.
In reality, these should have been checked first, but some
people in their haste to begin a business forget the most
important step of price comparison.
About The Author: Douglas Miller is the owner of
Hundred-Fold-Life. To learn how to find the best home based
business ideas and opportunities so you can work at home visit:
http://www.clixgo.com
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