Developing a Business Plan


For the business owner who has spent hundreds, if not thousands, of hours thinking about and planning his or her business, it may seem like a waste to spend the time, effort and energy to develop a formal business plan. But, there is a great deal of difference between pondering business choices and developing a business plan.

There are three important benefits of having a formal business plan. The first is that a business plan will be an essential part of any request for financing. A well-prepared plan improves your chances of getting the funds you want. Second, it can serve as a guide for policies and actions for your firm over a number of years. Strategies and statements should be well thought out, unambiguous and within your ability to carry out. Third, the process of preparing the plan will enable, if not force, you to focus on issues that are essential for the future success of your business.

A good business plan includes many details. It can take a great deal of time to gather detailed data, interpret it and present it clearly. For example, while pondering expansion of a new product, it may be OK to target future sales of the product at $3 to $6 million in a growing market over the next five years. For a formal business plan, the range would have to be narrowed considerably and the timing of the sales would have to be estimated for each of the five years. Also, expense estimates must be realistic, and the plan should include possible contingency plans if the new product sales are slower than expected.

A formal business plan should include the following:

  1. There are three important benefits of having a formal business plan.Business Identification
    Company
    History and milestones
  2. Purpose
    Mission
    Goals
    Objectives
  3. Description of the Business
    Company’s products and services
    Major Customers
  4. Market Analysis
    Market environment
    Competitive analysis, including competitors
    Risks
  5. Location
    Facilities and offices
    Leases or real estate owned
  6. Management
    Key employees
    Background
    Roles
  7. Personnel
  8. Financial Information
    Income statements, historical and projected
    Balance sheets, historical and projected
    Cash flow analysis

As you proceed through the business plan, remember that statements should be supported with data whenever possible. Data adds credibility. It is often advisable to use charts and graphs to present the data to make it more easily understood. Detailed guidance in the preparation of a quality business plan is available from the U.S. Small Business Administration’s website, at https://www.sba.gov/tools/business-plan/1.

Conclusion

The preparation of a full-blown and high-quality formal business plan can be an arduous task. It can take considerable time and force you to address issues that are easy to put off in the daily operation of your business. However, it can be worth the effort.

The process of preparing the plan will put you in a better position to make daily decisions. The final document will be useful when seeking financing, explaining the business to potential key employees and someday in creating a document for selling the business you worked so hard to create.

 

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