Business Plan FAQ

What is a business plan?

A business plan lays down the foundation of your business.  It clearly shows how the business would grow, the markets you wish to service, the feasibility of starting the business, and financial forecasts for the business.  Establishing a business plan is a critical step in launching any business venture.  It allows you to think objectively and critically about how to make a success of your business. It becomes a live document, where it serves as a guide to keep the business on the right path.  The business plan states your business objectives, and gives detailed information on marketing strategy, profit and loss projection and cash flow analysis. A business plan can be fairly short or long and detailed.  The business plan must be as comprehensive as possible.  The best approach for achieving a successful outcome is to think critically when developing your business plan.

Why do I need a business plan?

Writing a business plan forces you to be objective rather than optimistic when deciding whether to start your business.  When you honestly consider the financial picture, market projections, and business objectives, you will make a rational decision.  Prospective business owners can get caught up in their dream of running their own business and somehow fail to honestly account for all relevant factors that come into play.  A business plan is a necessary tool. It reduces the likelihood of starting a business venture based on sandy foundation.  The foundation needs to be on solid ground. Ideas need to be scrutinised and evaluated during the process of writing a business plan. The financial figures need to make sense.  This kind of information has to be built in before you invest your time and money into a business, not afterward when it's too late.  Whether or not you go forward with the business, the information contained in the business plan becomes invaluable for future reference.

Do I still need a business plan if I'm going to fund the business myself?

Yes.  Business owners often operate under the mistaken assumption that business plans are only necessary when seeking financing from investors.  But a business plan is a blueprint for your business, and can be helpful even if you intended to provide all the capital for your business.  Writing a business plan helps businesses stay on track as they grow.  You can use the business plan as a guide and as a goal.  If you've done the proper research you will have calculated solid financial figures which the business can use as targets to measure its relative success.  These targets will help keep the business on the path which you originally intended and discourage tangential ideas from pushing the business off course.  If you were building a home, you would obviously give serious thought to every step of construction, from creating the foundation to laying bricks and installing flooring.  You would do this before you poured even a drop of cement, and you would refer to the blueprint during construction.  You should consider your business in the same context and give the business plan as much time as necessary to ensure you have the proper blueprint, then continually refer to the business plan as the business grows.

How do I write a business plan?

There is no exact science to writing a business plan, though there are guidelines which most successful businesses follow.  First, is to include a statement outlining the objectives and goals of the business.  Second is to include financial information such as startup costs, revenue projections, profit and loss projections, breakeven points, and cash flow analysis.  You don't have to be an accountant to use these figures but you should at least be familiar with the terms and have another person familiar with accounting double check your numbers.  Catching financial issues early is critical. Next, you'll have to consider your audience.  If you're writing for the purpose of getting capital for your business, you'll want a strong emphasis on financial information and a professional tone in writing.  If the business plan is primarily for yourself, you can dispense with the professional writing style and a few elements of financial projections, although for best results, you should do as many financial projections as possible.  Even if you're not aiming to get investors, financials will help you understand how your money will be used. 

How to Write a Business Plan

A good business plan defines your business, identifies its goals and is a tool for introducing the company to investors, customers, employees and contractors, among others.  It is a business roadmap that highlights obstacles to avoid, allows for efficient use of resources, and organizes a company's financial information in order to anticipate the expenses and profits of the business.
Think Strategically  - Business plans give employees and investors (as well as reminding owners) a broad understanding of the business, along with specific numbers to analyze. No matter the industry, a business plan should always track three concepts, which often overlap: communication, management, and planning.  Below, we will cover these three elements as well as approaches on how to write a business plan.  The business plan communicates the viability of your business to potential investors, attracts partners, and helps convince key employees to sign on.  It acts as a tool to manage, monitor, and evaluate your progress, as well as allowing you to modify plans as your project progresses.  Finally, the business plan is a planning tool which acts as a roadmap through different phases of your business, taking into account potential hurdles and how best to overcome them.  While the emphasis of your business plan will vary according to your goals, when you write a strong business plan you provide your business with a key element for success.  Business plans are equally important to small or big businesses.  These plans force owners to think strategically and analyze with clarity the current business climate rather than simply leaping into a situation before looking.  A good business plan doesn't guarantee success, but a company without a solid business plan is far less likely to succeed than a business built around a carefully considered plan. 

Who Is Your Audience?

Generally speaking, business plans define the business by identifying goals and setting out how you aim to achieve them.  One of the first things you should consider in writing a business plan is the audience you plan to reach.  Writing the plan to attract investors will require substantially more persuasion than writing a business plan to keep yourself on track. 

Looking for Capital Investment

If the primary objective of writing the business plan is to attract investment capital, then the plan should reveal your vision of the company alongside a healthy dose of salesmanship to convince investors that your plan is feasible and will be profitable.  You have to show investors that you are an expert in your field, or that you at least have a solid grasp of the industry (this is where heavy numbers and analysis come into play) and how your company can excel in that business climate.  Think of your business plan as the resume of your company that will be examined by an employer.  You want to accentuate the positive, while remaining honest about your ability and experience. 

Business plans should include:
•    a summary of the purpose of your business and a company description
•    an executive summary (details of the organization and management of the business)
•    market analysis (emphasize your place in the market while being honest about competitors)
•    a funding request
•    marketing and sales strategies
•    financial information about your business—this should be detailed, with information about start-up costs, expenses and revenues, etc.
•    a professional resume or resumes of those in charge of the business, which sets forth business accomplishments and/or expertise.

The plan you present to investors should track the three objectives of a business plan mentioned above (communication, management, and planning), and highlight the strengths of your business model and the niche in which the business will operate. 
Particularly true of business plans aimed at attracting capital investment, your business plan should be polished and professional.  It's difficult to project an aura of confidence if there are grammatical or mathematical errors, or if the plan is otherwise poorly presented.  Numbers should be double-checked by someone with professional experience and the actual writing ought to be assigned to someone within the company who has experience writing business plans or farmed out to a professional writer who can better present the message.

Stay on Target

If the business plan is intended primarily as a tool to keep your business on target (i.e., you are not seeking outside investment), most of your energy ought to be spent analyzing and predicting financial information.  You're not pitching the business to yourself, so you can dispense with most of the salesmanship, but keep it professional since you may be showing your plan to contractors, employees, customers, etc. in the future.  As long as the financial projections are accurate and you competently describe your business operations and goals, you'll be in good shape to keep your business on the right path. Even if you're not a financial expert, you will need to absorb and master certain financial concepts -- for the health of your business as well as for the business plan.  General concepts such as breakeven analysis (how and when the business will turn a profit), estimating startup costs, and financing basics such as cash flow projection and management are essential.  For specific information on financials which should be considered, go to the U.S. Small Business Administration at www.sba.gov.  Even if the business plan is targeted at yourself simply to keep you on target, you will want the most accurate projections of financial stability.  And in order to do that, you'll need a solid grip on financial concepts and an honest appraisal of the numbers you are crunching.