STEP TWO: THE BUSINESS PLAN
Five Things Every Business Plan Should Address
Create the Business Plan
We will not bore you with the “not planning is planning to fail” lecture, but just about every industry relationship you need will require a formal business plan. The business plan consists of a narrative, resumes and several financial worksheets. The five things every business plan should address are:
At its core, the fundamental value of an agency is in the capability of its people to execute its objectives. Therefore, your business plan should include information about the people who are responsible to execute it. At a minimum, include resumes of each of the key players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities possessed by each. For start-ups, a lack of demonstrated track record may inhibit your ability to attract prospective employees, customers and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be known in the community and/or industry.
B. The Opportunity
A key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire customers, including competitors. This section should demonstrate that you know who your customer is, what your products and services are and how you will position your products and services to be selected over those of your competitors.
C. The Business Environment
Your business plan should demonstrate that you have a keen awareness of the external business environment in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these factors is relevant to the operation of your agency.
D. The Risks
Many business plans, especially those that will be used outside the agency to attract stakeholders, often make the mistake of painting only a rosy picture; however, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced. Potential stakeholders, especially prospective carriers, will develop confidence in those agencies that pose the risks and provide strategies to resolve them.
E. The Numbers
You need to have realistic expectations of where revenues will come from and when and how cash will be used; furthermore, insurance carriers will be interested in growth projections. At a minimum, you should have a start-up budget, a cash flow forecast and a production forecast.
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