Effective business plan vital for growth, investment

Whether the goal is to start, expand or sell a business, investors and lenders alike look for one thing: a well-thought-out business plan. The plan should present a clear picture of the business, its products and services, operations, fi-nances and potential for future development. Without this fundamental tool, it's like sailing a boat without a rudder, and you're more likely to find the business floundering at sea than heading on a well-charted course toward profitability.

The exact content of the plan will be determined by its ultimate use. However, most plans should have the following key components:

The summary

The purpose of the business plan should be stated here. For example, are you seeking financing, focusing on restructuring or attracting potential managers to the business? In addition, the summary, which should be no more than two pages, should describe the nature of the business, its legal structure and the products and services sold.

Include information regarding the business' and/or product's stage of development and marketplace position. Be sure to state what distinguishes the business and its product or services from the competition.

Identify current customers and the market potential, then present an over-view of the financial picture. Include in-formation about desired financing (if that is the major purpose of the plan) and how it will be used.

Business goals, objectives

This section should feature a more detailed description of the business, in-cluding a brief history, as well as key goals and objectives and how the business will accomplish them. Also clearly communicate the business's strengths or weaknesses here.

Market analysis

This is essentially the marketing strategy, where you describe not only the product or service, but also the potential customers and how that product or service fills those customer needs. An action plan, describing specific advertising and promotional strategies, should give readers an idea of how you plan to reach that potential market.

A vital part of this section should focus on how you plan to price the product or service and how the pricing and marketing compare to the competition's. If you're trying to sell the business, include previous success stories that demonstrate the company's strength and market appeal.

Management overview

Highlight those skills most necessary to run the business successfully and who within the organization currently possesses them. Provide brief work histories of the principals and their current sal-aries and responsibilities.

Indicate the extent to which the company uses outside resources to fulfill critical business functions and how you see that situation changing over time.

Description of operations

Give details about the business facilities, equipment, raw materials and supplies, work force and hours of operation. Go into detail about the process of producing the product or service.

Provide flow charts, if necessary, and discuss how the goods are delivered to customers. Describe the current work force, and include projections for future hiring by function or department.

Financial information

Be as specific and complete as possible in presenting financial information. Show the company's track record by in-cluding financial statements for the last several years.

In addition, present a financial projection of the expected profit or loss over the next several years.

Project the expected cash in-flows and out-flows, including the anticipated revenues and expenses, as well as funds borrowed and the repayment plan. If you're just getting started, you'll most likely need to present some personal financial information.

This should include a personal financial statement listing all personal assets and liabilities, as well as two years of personal tax returns. This will help to let lenders know you have the financial wherewithal to launch the business.

Finally, don't forget to include other relevant information that will help to portray a positive image of you and the company. Letters of intent from potential customers and other investors, special awards or recognition, and other information can make the difference when it comes to attracting interest in the business.

(John Wanamaker, CPA, is a partner with BKD and the director of the BKD Southern Missouri practice's management consulting services de-partment.)