Thursday, December 11, 2014

Even more about planning

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     with examples from small businesses.

     The heart of business planning is marketing. I've written a lot about this in the past in this blog--especially over the past two days. 

     When you apply for a loan, however, the lender wants as much information as you can provide. A formal, written business plan must cover other aspects of you and your business.

     Example: In one of my own businesses, I once applied to a bank for a substantial loan. They wanted to know all of my personal history as well as the complete background information on my company for the previous five years. So much for yesterday. Then, they wanted to know how I had arrived at the $100,000 I was requesting--they wanted to know the future. How would I spend the funds? How did I know I was requesting enough? How would I pay them back? How would I handle sales problems as they surely would arise? How would I handle competition? How would I ride through a general economic downturn? How well did I know my industry? The questions seemed endless, but I had to admit they were pertinent. After all, the bank was considering putting $100,000 on the table, and they wanted assurances that I could be trusted and would pay back the loan. Then came the kicker. Not only did they want answers to all their questions, but they wanted everything turned into numbers projected forward for five years.

     Reducing verbiage to hard numbers is like wringing all the water out of a wet towel. When you do the numbers, all the crap disappears. Your history to date and your projections into the future--this is where the rubber meets the road. 

     The numbers give validity to all that you say in a written plan. This is where you convince someone else that they can believe in your market projections. 

     For more on planning, see previous blogs--Planning Box, Business Check-up, Daily Planning, etc. Don't neglect the planning part of running your small business. It's some of the most important work you will ever do.  

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