How To Write Up A Yearly Business Plan
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—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.
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