Why should you create a written business plan?
Why should a potential business owner go to the trouble of creating a written business plan? There are several reasons:
- The process of putting a business plan together forces you to take an objective, critical, unemotional look at the business project in its entirety.
- A business plan is an operating tool which will help manage the business and work effectively toward its success.
- Financial backers will require one. A completed business plan communicates ideas to others and provides the basis for a financial proposal.
Framework: Business planning is the framework in which to structure concepts and information about a project. A well-written business plan will determine the feasibility of a project and lay out the action necessary to complete it. Taking an objective look at the business plan will identify areas of weakness and strength, pinpoint needs that might otherwise be overlooked, spot opportunities early.
Financing: The business plan also provides the information needed by others to evaluate a venture, especially if seeking outside financing. A thorough business plan will quickly become a complete financing proposal that will meet the requirements of most lenders.
Coordination: A business plan organizes, directs, coordinates, controls and facilitates the development of a project from its inception to its completion. No matter how the process of the plan is described, basic business planning is a systematic methodology for reducing risk and enhancing success for any type of business operation.
There is no exact formula for putting a business plan together but a number of specific sections should be included in a business plan.
- Executive Summary: This is an overview of the business plan. Even though it will be at the beginning of the plan, write it after the rest of the plan is completed. It brings together the significant points and should convey excitement.
- General Description: Explain the type of company. If this is an existing business, give its history. If it is a new start-up business, note some of the qualifications to start this business. Why is this business needed and what is its chance for success?
- Products and Services: Describe the product and/or service. What are its unique features? Why will customers come to this business?
- Marketing: Identify your target market. There should be specific target markets that will need your products or services and be willing to pay for them. Outline your marketing strategy to draw customers to you rather than your competition.List your primary competitors and provide an honest appraisal of their strengths and weaknesses and how you will compete successfully against them.
- Management: Identify the people who will be active in this business. Describe their skills and experiences.
- Legal: Describe the type of legal organization; sole proprietorship, partnership, "S" corporation, limited liability company, corporation. Are patents or trademarks involved?
- Finances: State the business' financial requirements and where these funds will come from. Project revenues, costs, and profits. Your efforts in developing the financial statements will help you understand the cash flow of your business, your break-even point and the sensitivity of your business to fluctuations in business levels.
- Operations: Explain any systems or processes that will be used. What facilities will be used? What supplies will be needed and where can they be obtained? Who will provide the labor and how will it be accessed? What are the hours of operation of the business?
Remember that the summary, which starts your plan, is the single most important part. Many people will not read past the summary. It must enthusiastically present enough information so readers will continue. The complexity of a business plan will vary with the type of business, and the size of the plan will reflect that complexity.