A business plan can be an useful document whether you are still in the planning stages or already have an existing business. You can use a business plan for three basic purposes: communication, management, and planning.
Before you begin writing your business plan you should make a date in the future (perhaps annually) to review and update your business plan. A business plan is never complete as a business should be a dynamic entity that continues to grow and change as the marketplace and key partners change.
A business plan is a communication tool to attract investors, lenders, employees, and partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business. Studying your business plan will help future investors, lenders, employees and partners determine whether they wish to become involved with your business.
As a management tool, the business plan helps you track, monitor and evaluate your progress toward short- and long-term goals. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments. Updating your business plan can also be a time to plan and brainstorm future changes and growth.
As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster a broader understanding of where the business is going.
Before you begin writing your business plan, consider four core questions:
1. What service or product does your business provide and what needs does it fill?
2. Who are the potential customers for your product or service and why will they purchase it from you?
3. How will you reach your potential customers?
4. Where will you get the financial resources to start your business?
A business plan will include three main sections covering the business details, financial data, and supporting documents.
The business details will include a description of the business, marketing overview, description of competition, operating procedures, personnel, and business insurance.
Financial data will include loan applications, capital equipment and supply list, balance sheet, breakeven analysis, income projections (profit and loss statements) including a three-year summary, and cash flow.
Supporting documents should include tax returns for the principals, personal financial statements, a copy of franchise contract if a franchise, lease or purchase agreements for physical space, licenses and other legal documents, resumes of all principals, and letters of intent from suppliers.
While you can outsource the writing of your business plan it is not recommended. As the principal force behind your business you are the one with the answers so you should be the primary involved in writing the plan. There is support available, including workshops, computer programs and tutorials, and mentors. You should involve your financial partners (such as your accountant and bank) as well as legal representatives.