We have all heard the stories of businesses that were conceived on a cocktail napkin or the back of an envelope. It stirs the imagination and inspires us when we see the incredible business successes that started out with humble beginnings like Microsoft and Apple. And yet, you can rest assured that a start-up will not be able to secure investors or a loan based upon a plan on a cocktail napkin or the back of an envelope. Therefore, if you are not just dreaming of success, but are serious about launching a successful business, sooner or later you will need a good business plan.
A sound business plan provides you with a comprehensive, detailed overview of all aspects of your business. This overview is essentially the framework or skeleton of your business – the underlying structure that provides the basis of your entire operation. If you develop a business plan in advance, it allows you to examine the feasibility or pros and cons of your proposed business before you make a financial commitment to it.
There are four excellent reasons to create a sound business plan:
- The process of creating it forces you to take an objective, critical, and unemotional look at your business prior to and after its inception.
- It requires that you do your “due diligence” to learn what you need to know about the business and industry so you can make a realistic assessment of your existing resources (including yourself) as well as those you will need in order to be successful.
- A sound business plan will be a powerful communication tool that reveals your ideas, strategies, and processes, which will provide the basis for financing options.
- A great business plan will serve as an operating blueprint that will help you manage, measure, and ensure your business success.
There is no way to over-sell the importance of planning. Sound planning makes explicit the strengths and weaknesses of the business, any needs that might otherwise be overlooked, short and long term opportunities, and potential obstacles that might arise. The time and energy you spend uncovering these issues will go along way to help you avoid costly errors and reach your business goals more quickly and effectively.
Considering how important a business plan is, why do so many small business owners put off creating one? Some don’t know where to start and others I have spoken to feel it is too much of a distraction. What’s really the biggest obstacle to writing a sound business plan? For many aspiring entrepreneurs, it’s simply a matter of getting started – knowing what information is needed, where to find it, and then how to actually put it in writing.
In fact, this proverbial first step of the thousand-mile journey is relatively easy. For starters, you’re not venturing into unknown territory. Millions of people just like you have transformed their bright ideas into thriving enterprises. Putting together a business plan is also a valuable learning experience, an opportunity to learn about your chosen new field, and yourself. As you learn more, your energy and enthusiasm for this venture are sure to increase as well.
Best of all, there are many resources and tools available to guide you through the process from start to finish. These aides can’t do the work for you; you will still need to invest a fair amount of time and effort to research, write, revise and then conduct more research. But once you get started, you may well find yourself wondering why you waited so long.
To get a complete picture of how a business plan is structured, visit the Small Business Administration’s online Business Planning Basics page. The pages outline the elements found in most business plans and provide a wide range of sample plans for various types of businesses.
The SBA’s Basics page also offers helpful guides to financing, marketing, employee relations, taxes and other topics that entrepreneurs should consider as they shape their business plans and strategies.
SCORE, in partnership with the SBA, provides another valuable resource: business plan templates. These easy-to-follow templates are available in Word and PDF formats. Download them directly to your computer and get started.
Each section explains the type of information that is required, why it’s essential to the plan, and questions you will need to answer when seeking financing. The templates are also a great way to organize your plan as it is being developed. You will see immediately what areas are complete or have gaps, and what sections are ready for editorial fine-tuning.
You’ll also find templates for bank loan requests, competitive analyses, personal financial statements, opening day and projected balance sheets. There’s even one for existing businesses looking to expand or add new services.
Remember, that while these tools can provide valuable guidance, they are by no means all-inclusive. The nature of your business or industry may require that you consider specific issues beyond a “generic” business plan.
Other popular options for aspiring entrepreneurs are business planning software programs. Among the most popular products are Business Plan Pro (Palo Alto Software, Inc.), Plan Write (Business Resources Software, Inc.) and BizPlan Builder (JIAN). Each offers step-by-step guides for developing business plan sections; spreadsheets and forecasting tools; industry analyses, financial resource guides, and other valuable features.
Be sure to examine and compare these products carefully before you make a purchase. You may find one program easy to follow and another too complicated to use. The industry information may not be as current or detailed as you need. And, you should avoid paying for more features than you really need.
I personally have had an opportunity to use Business Plan Pro and was amazed at how easy the wizard is to use. I cannot comment on the others as I have not used them. However, after years of using Microsoft Word and Excel to create business plans, I will be using Business Plan Pro in the future. Version 11.0 adds many new features, over 500 sample business plans and their website claims that it is the preferred format by the SBA, investors and major lenders.
Finally, even though your business plan may look complete to you, there may be more work to do. Share it with others who can provide an informed, objective critique and suggestions for improvement. I highly recommend that you have a business plan expert from SCORE read through it before you show it to a potential investor or lender. Remember, “You never get a second chance to make a good first impression.” And don’t file your plan away after you get your business started. Periodic reviews will help you gauge your progress; identify areas for improvement and opportunities for growth.
Posted by: Mike Clough