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Smith: Well-written plan serves as business road map, helps with financing

POSTED: March 1, 2008 5:00 a.m.

A story was once told about a pharaoh who wished to build a temple for himself. As the slaves were milling around waiting to begin construction, one said to another, "Do we have any blueprints for this project? Or are we supposed to just fly by the seat of our chariot?"

Overhearing the comments, the pharaoh walked over to where the two slaves were standing.

As the pharaoh stood before the slaves, he uttered, "Relax, boys. I heard your question, and it is an excellent one. Certainly we should have a blueprint prior to you all constructing a monument to me."

The pharaoh went on to say, "You must have a blueprint for anything that you wish to build. For instance, before I built my first chariot factory I had a scribe pen my thoughts for my business plan. It’s absolutely crucial to have a business plan in hand."

Centuries later, the pharaoh’s statement is still true. If you are interested in starting a business, writing a business plan is critical.

There are two primary reasons why a business plan is necessary.

A business plan will serve as a road map. Once written, it should show how the business will evolve from a plan to actuality.

Also, it will give direction on how the business will be managed, what responsibilities all personnel will have as well as performance goals. The plan will include details with regard to marketing, obtaining financing, site location, competition and cash flow projections.

Follow your business plan as you would a road map. Ever since the idea of starting a business first popped into your mind, you have subconsciously been putting the pieces together. But the mind is not flawless in that we all forget information from time to time.

Hence the reason to write the business plan. With a pen, put the plan on paper or type it into a computer. There will come a time when you ponder what direction the business will go in the future. With the plan on paper, there are no doubts, and if course corrections are needed, they can easily be applied.

A second reason for a business plan deals with financing. Should an occasion arise in which financing is needed for the business, a business plan will be necessary.

Of the various factors that a banker uses in making a credit decision, the business plan is one of the more important ones in the process. The banker will look at the ability of the borrower to repay the loan.

In a narrative fashion, you should convince the banker that you have the experience and skills to operate a business. Building a case for your particular skills along with logical cash flow projections are cornerstones for obtaining credit.

J.C. Smith is a consultant for the Gainesville district office of the University of Georgia Small Business Development Center, 770-531-5681. His column appears Tuesdays and at gainesvilletimes.com.



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