Do You Need a Business Plan?
What Is a Business Plan?
A business plan is a detailed written summary of how a business or entrepreneur plans on organizing and then effectively running a potential business in a way that will allow it to succeed. A business plan is often necessary, as potential loaners or venture capitalists who will be loaning money to fund the business want to see a concrete plan of how a business is going to be laid out and run before they fund it. However, a business plan is an excellent tool for entrepreneurs as well, as it gives them and their employees specific guidelines as to how the company will be run and what it will take for it to succeed.
Do You Need a Business Plan?
If you're planning on having your business funded by a bank, venture capitalist, or other type of investor, you will need a business plan. While you may be fully aware of how your business will be run and what it will take to make it succeed, investors need to be certain the entrepreneur has thought the entire process of starting and running a business through. In addition, they want to make sure the entrepreneur has a thorough understanding of what is required to make a business succeed before they will invest any money into it.
Even if the investor does not require a business plan, or if you plan on funding your business without the use of an investor, an effective business plan is still an invaluable tool. Having a well thought-out plan helps to reduce risks associated with starting a business by knowing exactly what is needed ahead of time. When financial stability, life savings, and other people's money are on the line, it is imperative the entrepreneur knows exactly what he or she is getting into.
Writing Your Business Plan
There are many resources available to help you format and write a successful business plans. There are entire books written on the subject, as well as many resources online that offer free business plan templates and advice.
In general, however, the typical business plan will include, at minimum, the following points:
- Executive Summary. Your executive summary will explain the basic business model and the reasoning behind why this strategy will result in an effective business.
- Mission. This section contains the purpose and mission statement of your company.
- Keys to Success. This section will include the tools your company will use to set itself apart from the competition and succeed in the industry.
- Company Summary. Unless you're starting a brand-new company, this will be a background of your company, including the company's age, number of employees, location, revenue, sales figures, and other pertinent information. For a brand-new company, the company summary should include expected number of employees, projected location, etc.
- Services Provided. This is a basic run-down of what services your company will be providing to its customers.
- Market Analysis Summary. This section should include the industry, product and pricing strategy, promotion and distribution strategy, and production information.
- Management Summary. The management summary will contain the background information of key personnel, their business achievements, and experience in the industry.
- Financial Plan. A detailed financial plan is crucial. Included in this section is source of funds, existing loans and liabilities, a monthly cash-flow analysis, and projected sales and costs.
Writing a business plan is a time-consuming but invaluable process when starting or funding a business.