How to Review a Business Plan

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Yoiur review of a business plan will vary somewhat depending on your relationship to the business. If you are a loan officer, you will primarily be interested in whether the company's financial information is solid and accurate. If you are a potential investor you will be interested in the financials as well, but you might be more likely to give the company the benefit of the doubt if the business plan does a good job of presenting its vision.

Read through the text of the business plan with an eye toward evaluating whether it provides a realistic assessment of the company's strengths and weaknesses, as well as the market environment in which it operates. Make sure that it presents a balanced picture, and portrays some of the challenges that the business faces rather than only detailing its advantages and its bright hopes for the future. Pay attention to the tone of the writing: beware of a business plan that relies too much on superlatives, exaggerations and descriptions that seem too good to be true.

Assess the financial section of the business plan. If the business owner is requesting a specific amount of money, calculate whether this sum will be sufficient to achieve the goals outlined in the business plan, and whether the projections for growing the business and paying off this sum seem realistic and well grounded. Pay attention to past rate of growth, and the variables that helped to bring about these increases in revenue, such as advertising investments and expansions into new markets. Evaluate the company's margins relative to industry averages. For example, if you are reviewing a business plan for a restaurant, make sure that it has consistently achieved the industry standard of not spending more than one third of its income on food costs.

Research the data in the business plan to independently verify that its claims are sound. Gather statistics about the particular industry to evaluate whether this company is achieving goals consistent with the overall segment of the econoomy, and whether its economic sphere shows potential for growth. Scan newspaper articles and, if possible, speak to other entrepreneurs in related industries in order to get a sense of whether the company's reputation is consistent with the claims its owner makes in the business plan. Test some of the company's products and services for yourself in order to form for own judgment about their quality and potential.

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About the Author

Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.

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