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What is a Business Plan and Why Do I Need One?

by Tim Shipley

A business plan defines your business activities, objectives and strategies to achieve your goals. A business plan should contain a description of your business, ownership, a market study, your marketing/promotional strategy, balance sheet, income statement, cash flow analysis and a biography about your work experience and skills. A good business plan is a crucial part of any loan package as it provides detailed information about how you will repay your loan. In addition, it will help guide you in making decisions as you grow and develop your business, address unforeseen situations and keep your focus on your company’s operations.

How Much Money Do I Need to Start a New Business?
A general rule of thumb is to have at minimum 1-year amount of funds to cover operational expenses (fixed and variable cost). These costs include wages and funds to pay your loans.
As a new business, you want to be certain that you have the liquidity to sustain operations until you generate enough cash flow to cover all expenses. It is as equally important to build a cash reserve over the years for expansion and/or absorbing times when the operations experience a slow-down. One of the leading causes of business failure is the lack of capital. Make sure you work with a banker or accountant to fully understand your company’s cash flow needs and address what sources are available for you to explore when raising capital.

Answers provided by Tim Shipley,Vice President, Commercial Lending at Simmons Bank. He can be reached at 314-569-7246 or The views in this article are those of Tim Shipley individually and do not reflect those of Simmons Bank.

Submitted 1 years 10 days ago
Categories: categoryAsk The Banker
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