I just spoke with a bank manager yesterday about how his clients do not have well thought out plans for starting a business or expanding a business. So, I thought I’d help you out here.
There are some standard questions the bank will ask:
– Do you have experience in the industry?
– Does your plan make sense?
– Is there a market need?
– Can you make money?
– Does your pricing make sense?
– What are the risks?
You need to have your bases covered on these questions before talking with the bank.
Then, the bank will ask for a business plan. The plan covers a lot of the work I have described in previous blogs on Building a Business.
For a new business, the bar is high. You are trying to prove a need without the sales to show you have a salable product or service.
For an expansion, you must have already demonstrated the value of your product. However, the bank will still require a well thought out plan that it believes you can and will implement.
Prepare for the Business Plan with Research
To prepare for the business plan research the government requirements, effect of the economic cyle (especially being in a downturn now), social and technological trends. Understand these issues thoroughly and how they will affect your business.
Then look at your possible competitors. This includes substitutes for your product, the ease of entering the market, the bargaining power of suppliers and of buyers. Take a look on the web and talk to industry participants.
Summarize your research with a list of opportunities and threats for your business.
Spend some time understanding your market needs and buying behavior (Refer to What DOES Your Target Market Want? below). The results will provide you with the information you need to determine your competitive advantage and/or the reason your expansion will be successful.
Follow the research up by understanding the value of your product or service to your customers in dollars and cents, particularly versus your competition. Ensure you have your product or service, pricing, promotion and delivery of your service figured out.
Then thoroughly consider your company’s strengths and weaknesses. Try to get an outside view from customers. A simple but carefully considered survey can help here. The wording will be crucial to obtaining useful information. Take a look at the Net Promoter(R) Score literature to see if this is the approach you want to use (netpromoter.com).
Armed with this information, you will be ready to prepare your business plan. I will cover this in the next blog. Feel free to let me know any specific issues you have so I can be sure to address them.
Photo Credit: NAIT
For more resources, see the Library topic Business Development.
Tove Rasmussen, MBA, has strong background in growing small and medium-sized companies through developing and implementing effective marketing strategies, developing leaders, and expanding in emerging markets. She is educated in international development & business with strong experience in all facets of business, including over 20 years experience growing companies with up to multi-million dollar budgets.