A business plan acts as a road map or compass; without it you will get lost in your business.
The biggest mistake is simply putting it off.
A plan contains a description of your business, an evaluation of your main competitors and several financial calculations.
But why are so many people so afraid or intimidated to write these plans of actions?
Many new business owners are so over-enthusiastic about their business concept, that they are desperately eager to begin and do not have the patience to look at the economic realities involved in their business.
Filling out the many financial forms in your plan can be an overwhelming process for any new business owner. Many are so intimidated by the financial calculations that they want to skip this process. If you recognize either of these tendencies in yourself, it is even more important that you prepare your financial calculations carefully and pay attention to what they tell you. Do not try to get out of it by telling yourself that your financial estimates will be wildly off base and yield useless results.
To alleviate this type of intimidation many have with a plan, it is imperative that Certified Public Accountants, bookkeepers, business plan or financial consultants be a part of your business support team. If you do not have these experts to assist you with your plans, you can take a course in accounting and buy the latest accounting programs.
Other resources to help you write a business plan include books, colleges and universities that work with Small Business Development Centers and counselors and mentors at the Service Corps of Retired Executives (SCORE). They provide low-cost classes on how to write business plans from $40 to $60.
Remember you are the brains of your business; your accountant is the heart and your attorney is the lungs. An accountant helps you keep track of your money and an attorney helps you protect it.
Since over 90% of start-up businesses are funded by private sources such as retirement or pension plans, unemployment insurance payments, savings accounts, divorce settlements, child support payments, etc., many people skip the business plan stage.
Even if you do not need money to start your business, writing a plan will help you see if your idea will be strong from the start. Without a plan, you leave far too many things to chance.
If you started your business without writing a plan of action and now you are close to running out of funds, then chances are you need to write an expansion business plan to look for other financing options while you move your business to the next level.
When seeking out funding for your business you need to make yourself known to financing sources well in advance of asking for financial help; approach multiple sources of financing; educate yourself on the available financing options; know which options are available to your type of service or product; determine which options to pursue at various phases of your company’s growth and always be ready to prepare your business for financing.
You definitely will need a plan if you are going to apply for a business loan, need investors, have business partners, have a management team, or are selling the business.
You can use your plan as a tool to generate interest from financiers, prospective employees and strategic partners.
Before you even start to write your plan, get copies of loan applications used by banks, commercial finance companies, and government. These applications will give you a good idea of how much financial information you will need to include in the business plan.
The most standard plan is a start-up plan, which defines the steps for a new business and the expansion plan which will take the business to the next level or to a larger market.
The plan count is not a good way to estimate how good your plan will be. Instead, measure the plan by readability. A good plan should provide a reader with a general idea of what a business owner is trying to accomplish after skimming or browsing over it for 15 minutes. The more standard start-up and expansion plans developed for showing outsiders normally run 20-40 pages of text, easy to read, well-spaced text, formatted in bullets, illustrated by business charts and short financial tables, plus financial details in appendices. Never write a business plan 50 or more pages.
At a minimum, your plan should have the following sections: Executive Summary, Company Description, Product or Service, Market Analysis, Strategy and Implementation, Web Plan Summary, Management Team, and Financial Analysis.
The most important part of your plan is the Executive Summary. The Executive Summary is an outline of the entire business plan. If you do not have a good Executive Summary, chances are the SBA, bankers and potential investors will not read the entire business plan.
Just remember that the most important audience for a business plan is YOU! Only you are accountable to all of the statements, claims, stats and facts inside of your business plan.
Remember by skipping the business plan stage chances are your business will face many, many risks and you might find yourself out of business within 2 to 5 years.