What is a business plan?

At its most basic level a business plan is putting your ideas about your business on paper. When it's in your head, it's still just an idea. Putting on paper makes it a plan. It is the first step in making your business idea become real.

It essentially becomes the blue print for you to build your business. Just like your house blue prints eventually became the house you live in.

Your plan will be a look ahead to what you will need; building, employees, loans; how much you will make and when, and so on. We will look into the parts of a business plan in later chapters.

Your business plan becomes your key tool to talk about your business with others.

You can use it to bounce your ideas off key people in your life to get input and a feel how other's will receive it.

Most importantly, if you need a loan from a bank, you must have a well thought through business plan to show your idea is viable and worthy of a loan.

Having a plan also provides you a tool to refer back to should the business not perform how you thought. Successful businesses follow their plans; failed business many times went astray of their plans.

While there is no universal template for a business plan, your business plan will have two main parts.

The first part is a narrative of your business explaining key things about your business and why it will be successful. This is commonly referred to as the Business Description and has several common sub-sections we will explore in the next chapters.

The second part is all about the numbers. Here is where the dollars meet the sense (not cents). In this part you will show projections on how you make money and spend it as well as how much you will need to borrow. Generally you show 2 to 5 years of projections.

Basically you want to explain to things here. First, explain who you are. Second, explain where you want to go with this business. You will do this by providing the following information:

Business Description: General information about your business, important background information, structure, the name, address, phone numbers.

Personal Goals: If you are seeking loans, it is really not about the business at this stage; it is about you, your goals, and your abilities.

Your Vision: A short statement about how you see the business and what you believe in.

Objectives: What your objectives are for the business. This is generally financial objectives and major milestones. It is a good idea to break it down into short-terms objectives/milestones and longer-term ones.

Product or Service Overview: Describe what you plan to sell and how it is different or unique

The business summary section should be about 2 to 4 pages of easy reading text.

Here you give an overview of how the business is organized and how it will operate.

Your team: list you, any employees you have, and other critical people to the business' day-to-day operations.

Suppliers: Who will you buy you goods, raw materials, feeds, etc from

Contracts and Agreements: List any contracts or agreements you have entered into or plan to enter into.

Changes needed: List key items you need to acquire or plan to acquire, such as renting space, building a shop/office, etc and how you will pay for these changes.

Contingency plans: Show how you will handle the unexpected. Plans are plans, but life interferes and things change. List the big things that could go wrong and what you plan to do if those things happen.

The Market refers to the area of the equine industry your business will be selling its goods to. Examples are: retail tack stores; Stables in San Antonio; Dressage Training Stables, Ferriers, etc.

In this section you will want to list trends in the industry and market that affects your business' sales and expenses. You will want to list the size of the market in terms of sales dollars as well as future growth trends.

You will also want to list your competitors and what you see are their strengths and weaknesses as well as how you will compete against them for customer sales.

Lastly, but far for least, is your customers. Describe your typical target customer and reasons why they are likely to buy from you.

Your business likely won't sell much if no one knows about you. Sales are the hardest thing you will do in real life running your business. So you should take a great deal of honest reflection as you think through how you will attract customers. Word of mouth is not very likely to work well these days; you will need more.

For sales: Start by outlining where you will sell you products (in store, online, etc). Who actually makes the sales (you?). Tell how customers pay you; cash, store credit, debit cards, etc as well as your return policy and warranties. Will you offer discounts to come customers?

Also, describe your approach to customer service.

For marketing: explain your product mixture, your pricing strategy as well as how your prices compare to your competitors.

Also, explain how you will promote your business and products (Google AdWords, print ads, etc) and how much you plan to spend on advertising.

Importantly, tell how your customers will learn about you and your products.

You may want to include some extras in your business plan like: photos, maps, news articles, personal or business references.

You will want to include anything that backs up the information in your business plan. While the overall plan should be about 10 to 12 pages (including the financial section), it is also quite appropriate to provide supporting documents as appendices.

This is especially important if you are trying for bank loans. You want to show to the bank that your plan is credible.

Ok, the financials. Bet you rather have a tooth pulled than think about this. But, business is a numbers game and you can't avoid numbers too long if you are to be successful. I know numbers can be intimidating, especially if your forte is working creatively.

We will do a fly by on all the critical financial components you will need to include in your plan.

Unless you plan is for expanding an existing business, you will be working with projections; educated guesses based on assumptions about how your business will perform.

Personal Net Worth: If you are not looking for loans, you omit this section. However, if you are planning to borrow money, this is the most important piece of the finances as it tells the bank how much collateral you have to back any loans.

Personal net worth is: Everything you own less everything you owe. On things you own: Include cash, cars, your house, property; just make sure you value things at what you can sell them for not what you paid for them.

On things you owe: Include your mortgage, car loans, credit card balances, student loan balances, etc.

Cash Flow Statements: This is critical as you need to know if you collect cash from sales fast enough to pay your bills. Here you basically list cash coming in from sales and cash going out for each month for the next 12 to 24 months.

Your business survival depends on positive cash flow.

Balance Sheet: This is basically the same thing as personal net worth, except that it is what the business is worth. Here what the business owns are called assets and what the business owes are called liabilities. The difference between assets and liabilities is called equity.

Income Statement: This is the calculation that tells you if your business is profitable or not. You take all your sales and subtract your expenses. If the number is positive you are profitable.

Break-Even Analysis: The sales volume (in units) required to just cover costs. In its most simple form you add up all of your fixed costs (like rent) and divide by your profit margin (sales price less cost of the item you sold) on each item sold gives you your break-even point. If you sell more than one thing, which most business do, you will have to determine your average profit margin for your sales mixture.

You want to show a minimum of two years of projections for all the financial statements.

Sounds like a lot work? Well it will take time and at times it will be painful. But you will find that a good business plan improves your odds of success dramatically.

Once complete, you can use at as a means to communicate to your bank, your partners, your employees, and even your suppliers.

Even more important, you can talk things over with your significant other (present or future) as their support will be so key to your happiness.

It is also a key tool for you to stay on track and help guide decisions.

Will it change? Of course it will. But you have a basis to make informed decisions about what changes are necessary and why.