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The heart of business planning is the marketing component. It's the market that will help you be all you can be. With a market out there for your goods and services, you can grow and expand. Without it, you will not go anywhere.
When you apply for a loan, however, the lender wants as much information about you and your business as you can provide. The lender can be a bank or a private party, but the request will come for you to provide a formal business plan.
Example: In one of my own businesses, I once applied to a bank for a substantial loan. The bank wanted to know all of my personal history as well as the complete background information on my business. So much for five years history. Then, they wanted to know how I had arrived at the $100,000 I was requesting. They were concerned that I might be requesting too little or too much.
Questions: How would I spend the funds? How did I know that 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 out a general economic downturn? How well did I know my industry? Was the market on an upward trend?
Their questions seemed endless, but I had to admit that they were pertinent. After all, the bank was considering putting $100,000 on the table. They wanted assurances that I could be trusted and would pay back the loan.
Then came the kicker. Not only did they want written answers to their questions, but they wanted everything turned into numbers. And they wanted the 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 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.
Even if you are not going for a loan at a bank, you owe it to yourself to do some serious planning. You don't need a lengthy written plan for your business. But you do need to do some serious thinking about the years ahead. Just remember that planning is putting numbers to the future market. It's hard to fudge with numbers.
Don't neglect the planning part of running your small business. It's some of the most important work you'll ever do.