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INTRODUCTION

Chad Frank and Kyle Carson, two young, hard working and dynamic duo bought local auto detailing business, Precision Auto Detailing. They worked for one of the largest package delivery services in the world, work their regular shifts at the delivery service from 6 p.m. to 10 p.m. and could devote the early part of the day to running their own company.

Within eight months, Precision’s sales were growing rapidly. Although Chad and Kyle have been plowing back all profit into the business, it is not enough to sustain the rapid growth of the company. To maintain the growth of the company Chad and Kyle need to arrange finance. Precision Auto Detailing is a small business. They need to prepare a solid business plan to present before banks for getting loan from banks.

A business plan is company’s business model. A solid business plan gives an idea to the outsiders (like bankers, venture capitalists) what exactly they can expect from the business they are going to invest in.

Explain why Kyle and Chad need a business plan.

A Business plan is outline that evaluates all aspects of the economic viability of the business. It also includes a description and analysis of the business prospects.

Precision Auto Detailing is growing rapidly. Although owners are plowing almost all the profits into the company, it is not sufficient to maintain the growth. Company is in desperate need of additional funds which can be arranged as loan from banks or from venture capitalists.

Chad and Kyle need to develop a business plan to use it as a selling tool in dealing with banks or investors who can provide fund to the company. A solid business plan is required to present before banks to get loan for a small business.

Prepare an outline of the elements you would recommend these two young entrepreneurs include in their business plan.

The Business Plan format is a systematic assessment of all the factors critical to the business, its very purpose and goals. It can be seen as a collection of sub-plans including a marketing plan, financial plan, production plan, and human resource plan.

Some suggested topics a business plan should have are:

• A vision statement

• The people

• Business profile

• Cash flow assessment

• Economic assessment

• Marketing plan

• Expansion plan

The business plan has many forms. There is however a format that is typical:

Executive summary

o explains the basic business model

o gives rationale for the strategy

1. Profile of company

2. Details regarding Management and performance

a. Number of employees

b. Annual sales figures

c. Location of facilities

d. Form of ownership including

3. background of key personnel including

4. Marketing Strategy

5. Production and manufacturing planning

6. Financial Planning

7. Human resources Planning

8. Evaluation and Control

. ()

What do bankers, other lenders, or investors want to see in a business plan?

Bankers, Lenders and other investors will look for:

• A sound business concept

• How the company will be managed and owned

• Product(s) and/or service(s) company will offer

• What resources company will need

• Potential strengths and weaknesses of the company

• Company’s short and long-term plans

• Company’s expansion plan

• The market and industry into which company is directed (including suppliers, customers, competitors, threats, opportunities)

• Marketing, sales and production plans

• Operating costs

• Projected cash flow and how sensitivity analysis

• Forecast on profitability, Net present value and Internal rate of return.

An investor or lender will not show interest in a business just because it is having positive cash flow and business is profitable. They are also looking for the capability of the management, future growth prospect of the business, its vision and goals. They want to see if business can sustain in long term or not, what are their future plans and will they be able to maintain the growth (so that they can meet short term as well as long term debts) or not.

What advice would you offer Kyle and Chad when they are ready to present their business plan to a banker?

Business plan is the selling tool of a business. It is a document that will convince the lenders/investors that company can sell enough of its products or services to earn satisfactory profit and will keep growing. It also demonstrates the strength of the company, its business, management, goal and future plans. A solid business plan can attract lenders/investors and a poorly developed business plan can distract the lenders/investors.

So, when Kyle and Chad are ready with a business plan, they should go through it once again and see if it is putting the strengths of the business strongly or not. Once they are satisfied with the business plan, they will present it to a banker. Its always advisable to put emphasis on short term plans and modify long term plan progressively as business grows.

While presenting the business plan to a banker, they should keep following points in mind:

1. One should always keep in mind that business plan is a tool with you to sell your idea. So, first of all have faith in your idea and business. Lack of confidence will not leave good impression.

2. Read and reread your business plan. Put yourself in banker’s shoes and think what questions he may ask. You should know your business plan in and out.

3. Show the banker the strengths of your business and convince them that it will maintain the growth.

4. Bankers are very much interested in getting their loans repaid. Show them expected cash flow schedule and how you are going to repay the debt.

Bankers are busy professionals, so Kyle and Chad are advised to keep the presentation short and to the point.

Conclusion:

Business plan is a document which covers all aspects of a business and can be used to convince outsiders (lenders and investors). It should cover goal, vision, business model, how company is planning to expand, expected future cash flow estimation, management, business scenario etc. In a nutshell, Business Plan format is a systematic assessment of all the factors critical to the business, its very purpose and goals.

One should formulate and reformulate business plan several times till the entrepreneur himself should become convinced. This is the document which is going to convince lenders and investors to put their money in the business and so it should convince them that their return is assured in this business.

A business plan should not be just a financial plan document. It should also cover marketing and production plan and Human resource aspects.

A business plan is not just a selling tool to convince outsiders. Business plan can uncover weaknesses in your planning process and helps in aligning business activities as per the business goal.

Reference:

• as retrieved on March 7th, 2009

• as retrieved on March 7th, 2009

• as retrieved on March 7th, 2009

• as retrieved on March 7th, 2009

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