Applying for a business loan demands putting some serious work into a business plan, defining the products and services you offer, a marketing strategy, competitor analysis, a financial plan, and a budget. After all that work, it might be tempting to “set it and forget it”, especially if you don’t foresee asking for funding anytime soon.
However: reviewing your business plan at least once a year has some great advantages. You’ll have a chance to see how your success lines up with what you projected, review any possible changes you might need to make, and even better: evaluate your expansion potential.
Challenge yourself to think about expansion: what kind of funding would you need to get to the next level? An extended and improved business plan can guide you as you grow your business and show banks and venture capital firms that you are worthy of obtaining more capital. Here’s what you need to know about writing one or improving your existing plan.
When to Expand Your Business
If you’ve already written an initial business plan, you may be wondering when the best time to improve and expand it is.
There is no wrong time to improve your business plan! You can always update it with more relevant and accurate information. After all, things can change once your business is up and running and you are able to get a better idea of your niche, your competitors, and your goals for the business.
Expansion should only be take on when you and your business are ready. If you aren’t sure if you’re prepared, look for some of the following signs:
- Your industry is growing
- You have more business than you can handle with your current location or staff
- Your business has a solid team behind it that is ready for growth and a new challenge
- You consistently meet and exceed the goals that you set for your business
- You have a steady cash flow and know your businesses finances inside and out
Because a well-thought-out business plan is often a requirement for business loans, you’ll want to be sure that you have an expanded or updated version if you want to obtain financing for your planned growth.
Writing a Business Plan for Expansion
Take some time for yourself and sit down with your existing plan. Let’s get started!
1. Update the Basics of Your Existing Plan
You’ll start by revisiting your existing business plan. If you initially started with a lean startup plan, you’ll want to expand upon it to create a more in-depth traditional business plan. The Small Business Administration outlines some common elements found in a traditional business plan, including:
- An executive summary: This is a brief statement outlining your company and what sets it apart from the competition. When you update it, be sure to summarize the plans for your expansion as well.
- A company description: Here, you’ll talk about your consumers and your competitive advantage.
- Market analysis: This section looks at your competitors, what they offer, their strengths, their weaknesses, and how you have set yourself apart in the market.
- Organization and management: How is your company legally structured? Who runs it?
- Your services or products: Explain what you offer your customers. Are these products patented or copyrighted? If you’re doing research and development on other products, explain that too.
- A marketing plan: Outline your strategy for attracting and retaining customers.
- Financial and funding details: You might not have had many financials when you started, but now that you’ve been in business for some time, you can provide key numbers regarding your revenue, expenses, and overall profitability. This is also the place to mention past funding that you have received, as well as future funding you hope to obtain.
- Financial projections: Look into the future of your expansion. What is your business forecasted to bring in? Be sure to use past data to back this up.
If you already have a robust business plan, be sure that all this information is up to date. If there have been changes to what your company offers, your key team members, or your marketing strategy, make sure the document reflects that.
You should have far more data to work with now that your company has been in business for some time. When you initially made your plan, you likely worked with competitors' numbers or projections. Be sure to include your own data. Providing numbers to back up your statements is always good practice and shows investors and lenders that you have a keen understanding of your financials.
2. Outline Your Business Expansion Strategy
Within your new business plan, you’ll want to outline your expansion strategy. You don’t have to get into the nitty-gritty, but whoever reads your plan should come away with a solid understanding of exactly what expansion will look like for your business.
Will it be a new location? Do you want to add a few dozen more employees? Are you planning on launching a new product that will take some funding upfront to develop? Everyone’s definition of growth and expansion is different, so be sure to say what it will look like for your business.
Once you’ve talked about what you are going to do, you can go into a little more detail explaining how you will do it. Outline the general steps your business will need to take to get there.
This is also the time to identify key players in your expansion. Who will be leading the charge? Who will oversee the new location, employees, or products? Similarly, don’t forget to say how your marketing will change. Will you be employing new tactics to reach new customers? Will you ramp up spending with your existing strategy?
3. Be Real About Your Business Expansion Finances
Expansion does come with a price. In this last section of your new business plan, it’s important to be realistic about what growing will cost you and how you plan on sourcing the money.
This is where you’ll get into the details of why your business is ready to take on more. Start by discussing the expenses involved with your expansion. What will be the upfront costs and what will the increased operational cost look like?
Next move on to how your revenue will change. Show projections based on the historical data of your existing business. If you’re taking out a business loan, one of the most important things to do here is to demonstrate that you can repay your lender.
Plan Your Way to Success
Business plans aren’t only for new businesses— they’re equally as important for growing and thriving ones as well. Writing a business plan with an expansion strategy can be key for helping you obtain the funding that you need to take your company to the next level. You’ll find that as your business gets larger, it becomes more and more important to have a guide to follow.