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Your business plan, from a banker’s perspective

Posted on: October 02, 2012 | Author: ATB Business & Agriculture

Whether it's on your computer, in a filing cabinet, on a napkin, or in your head, your business plan is a outline of who you are and where you're going.

And when you need financing or are trying to attract investment, your business plan is an important component of the conversation you will have with your banker.

"A business plan is sort of like a blue print," explains Wellington Holbrook, ATB's Executive Vice President of Business and Agriculture. "You would never give money to a builder who didn't know the equipment, materials, and cost required to make a house functional, and you generally don't want to give money to an entrepreneur who doesn't know what they want to build and how they're going to do it."

Although Wellington admits that many businesses—especially those with proven track records—don't have written business plans, he emphasizes that the most successful businesses do: "The bigger the dreams, the more important that plan becomes."

If you are writing your first business plan, or want to revise an outdated one, here are some points to keep in mind.

  1. Do your market research.

    Who are your customers? Who is your competition? Is your industry healthy or struggling? By providing this information, you will communicate that you understand and acknowledge the variables that are outside of your control.
  2. Explain why you believe you will be successful.

    Now that you have identified your market, you should explain why your business will thrive within that market. What's your competitive advantage? If you have a new product or service, how does it meet the needs of consumers? These details are the secrets to your success.
  3. Summarize the risks or potential obstacles to your success.

    No business venture is a sure thing, and many small businesses fail within the first five years. If you prove that you understand the risks and are prepared to face them, your banker will feel much more confident about your chances of success.
  4. Look one, three, and five years down the line.

    "Typically, you have five-year plans, and that's what most people expect to see. But the part of the plan that really matters is the 1-3 year range. Three years is a reasonable time frame to create a plan and see it through," Wellington explains.
  5. Make the case for yourself.

    When a financial institution or investor is looking at a business plan, they will also look at why the entrepreneur can make that business plan successful. They are banking on the people running the business as much as the business itself.

    "Whether it's a venture capitalist or banking assessing your plan, one thing is constant: good business people will find a way to make it work," Wellington says. "I've seen some not-so-great business ideas become successful thanks to great people, and vice versa. So make a case for yourself."
  6. Update it regularly.

    Conditions change all the time, so keep your business plan a living document by updating it regularly. If you don't think that's reasonable, then plan to review the plan and assess your progress at least once a year.

If this sounds overwhelming, don't worry.

"The business plan doesn't have to be a 60-page volume with everything documented—it can be as simple as writing bullets on the back of a napkin," Wellington adds. "But don't forget about that napkin—keep it in your wallet and make sure you look back at it and see how you did. If you create a business plan just for the sake of having a business plan, then it doesn't mean anything."

For the record, though, most bankers prefer plans on paper rather than on napkins. :)

You may also be interested in:

The ATB Business Plan Builder
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