Gerry's Blog

Frequently Asked Questions

various topics related to business planning
4 minutes reading time (723 words)

Frequently Asked Questions

Frequently Asked Questions

FAQ: I applied for a business loan but my bank says first I need a business plan ... do I need to hire a consultant to write it?

No, you do not. But let me qualify that.

In most cases, the bank does not care who writes the plan, they just need to be convinced that you can carry out the plan and that they will get their money back.

Think of it this way ... the bank may have used the term "business plan" but what they really want to know is "if we loan you this money, how do you plan to pay us back?".

The larger the loan, the more detail they will require. This is because larger loans carry greater risk for the bank. And I can tell you ... banks don't like to take risks.

For example, if you want to borrow less than, say, $10,000 and you already have a good credit history with the bank, your business plan may be as simple as the draft business plan I discussed in the August 15th blog, with a projection of the first three year's of income and expenses thrown in. If you want to borrow more than that and you do not have a credit history with this bank ... the business plan has gotta be a lot more detailed (and convincing).

So, do you think you can write the business plan yourself?

Many people can. Many people cannot. Most people could - if they had some help.

The good news is that there is lots of help available for people who wish to write their own business plan. This web site offers an excellent business planning framework that you can use for free. There are also many web sites that offer essentially a "fill in the blank" type of format to follow. The choices are endless so this is going to take a bit of research. Is this how you want to spend your time and effort?

Another option is to hire a consultant and give them a small pile of money to write the business plan for you. Perhaps, you think, you should just pay the money and get it done.

Well ... this isn't always the best option either.

I have seen plans that were written totally by consultants. They are generally things of beauty. They have scads of charts and graphs, lots of pictures, and pages and pages of industry stuff. Most have amazingly detailed spread sheets, sometimes covering up to ten years of sales. And to cap them off, they are usually printed by laser on high quality paper and bound using only the best of cover stock.

So, what's the problem? Unfortunately, all too often the entrepreneur does not understand what is in the plan and "where the numbers come from". This can lead to disaster if the banker asks any questions. Trust me ... the banker will ask some questions.

Don't get discouraged. There is a straight forward option for those who feel they need some outside expertise.

I find that a good process is for the entrepreneur to write what they can, using the business plan framework previously noted. The entrepreneur can then meet with a consultant to work through a collaborative process that leads to a business plan that meets the needs of the entrepreneur (and the bank).

Writing the plan is an iterative process. It develops over time as you meet with the consultant. The consultant asks the questions ... you provide the answers.

Now, this might sound like you are still doing a lot of the work. Well of course. It's your plan. Did you really think you could simply hand it off to someone else? Do you really want to?

Don't get me wrong. A consultant can bring huge value to the process. Asking the right questions is far more valuable that answering the wrong questions. A good consultant will also challenge your thinking.

In the end you will have a business plan that fully articulates your business concept. It should help you to assess the viability of your business idea and it should also help to convince the bank!

My next blog will consider the question "how do I decide if I should incorporate my business?". Stay tuned (Next post September 16, 2014).



Frequently Asked Questions
Frequently Asked Questions

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