Don?t run company on ?gut feeling? ? develop your plan

Try driving from Denver to Boston without a map. That experience would be much like starting or running or business without a business plan.

A comprehensive business plan is the best tool available to help a small business raise money. Commercial lenders will not even talk to you without a defined and complete business plan. A business plan also can be a communications tool for investors, suppliers, employees and others interested in understanding the operations and goals of your business. Lastly, a good business plan will be vital when you decide to sell you small company.

Although planning is critical to your success, it is often overlooked in favor of intuition or “gut feeling.” There are other obstacles that hinder planning, including:

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* Lack of know-how — it is sometimes difficult to know how to plan and what to plan for.

* Fear of the unknown — it is hard enough dealing with the problems of today without worrying about what’s going to happen in the future.

* Inexactness — the best set plans have a funny way of not working out exactly the way they should.

These obstacles are very real. They must be overcome, however, if you are to be successful. While we may find it difficult to face the future, heading into it without any direction is much worse.

A business plan is a written document that clearly defines the goals of a business and outlines the methods for achieving them. Remember the 3 Ms of a business plan. A complete business plan should describe the money, management and marketing strategies to be used in the business. Dreams and ambitions are great and important, but what really counts in the business world are results.

It is important to establish realistic goals with a sound methodology for achieving them. A business plan:

* Is the management and financial blueprint for a business start-up and profitable operation.

* Is written by the business owner with outside help as needed.

Explains how the business will function and depicts its operational characteristics.

* Details how the business will be capitalized and managed.

The elements of a good business plan are:

* Business description – including the business name, address and owner identification.

* Goals and objectives – clarified as to why you are or why you want to be in business.

* Products and services – described in detail and justified as to the reason the product or service is being offered.

* Sales and marketing – the core of your business rationale. Address these questions: Who and how large is your market? How will you be competitive? What pricing and sales terms are you planning? How will you market your products and services?

* Management/operating requirements – describing the equipment, facilities and people necessary to generate your products and services.

* Financial management – the most critical part of your business plan. Establish vital schedules that will guide the financial health of your business.

If you are just starting a business, your plan should also include:

* Projected start-up costs.

* Expected profit or return on investment (ROI) for the first year.

* Projected income state and balance sheet for two years.

* Projected monthly cash flow statement for 12 months.

If you have a young or established business, your plan should also include:

* Income statement and balance sheet for the last two years.

* Projected income statement and balance sheet for the next two years.

* Projected monthly cash flow statement for 12 months.

Any plan should include an explanation of all projections. If you believe that your finance or accounting knowledge is not sufficient to prepare these statements, get professional assistance.

The bottom line is: will, or does your company make a profit?

In the concluding narrative of your business plan, summarize your business goals and objectives and send a message that you are committed to the success of your business.Steve Muhlhauser is with SBA’s Colorado District Office.