Joseph Ferriolo, director of Wise Business Plans, said a well-written plan can deepen your insight and prevent future problems.
"The reason for writing a plan is simple," Ferriolo told Business News Daily. "You don't know what you don't know."
What is a business plan?
Think of a business plan as your road map to success: It lets you formulate the best route for your business to take.
"Research is one of the big value-adds of writing a business plan," Ferriolo said. "Research forces companies to learn what they can expect to make and what the industry trends are. Where has the industry been the last five years, and where is it going? If you're looking at becoming the next Kinkos, for example, the research would say maybe you can stay in the industry, but approach it from a different perspective."
If the research indicates your idea is viable, the actual construction of your plan depends on the goods or services you offer, how much funding you need and your goals.
In addition to helping you keep track of ideas and goals, writing a business plan can also help you obtain funding. If you need to take out a loan to get your business off the ground, or if you'll be seeking out investors to help fund your business, then a detailed business plan is a must. Creditors will want to see how and when you'll be able to repay them, and investors will also want to know when they can expect a return on their investment.
Business plan formatting
Every business plan requires a few basic sections that outline your business, what it does and how it will be run. Here's what to consider when thinking about your plan:
Executive summary. This is usually the first section of any business plan. It gives the reader a condensed overview of what your business is all about and how you intend to accomplish your goals. Although the executive summary may be the most important part of a business plan, Ferriolo advised new business owners to write it last.
"Most people don't write a business plan because they are disciplined but because they need to get something —either a partner or financing," he said. "Once you have completed the other segments of the plan, you can write the executive summary in a way that is focused on reaching that goal."
Company description. Think of this section as an extended elevator pitch. You want to thoroughly explain the goals of your business and how you will satisfy the needs of your market. Your company descriptionalso explains the competitive advantages that you believe will make your business a success.
Market analysis. This sectionis where you explain your market research to readers, including your specific target market and why this market segment would be interested in your product.
Organization and management. The organization and management section tells your readers about the structure of your business and who in the company is responsible for different operations.
Service or product line. This section includes a description of your product or service and any associated copyright information or research and development activities.
Marketing and sales. The marketing and sales section includes information on market penetration and growth strategies for your business, as well as information about your sales strategies and activities.
Financial projections. This section outlines what your business will accomplish financially over the next three to five years. Potential investors, creditors and business partners may ask for this so they know they're making a good investment with your business.
Funding request. If you plan to ask for a loan or other financial assistance, then you'll need to include a formal funding request as part of your business plan. This section includes specifics about how much money you need now and how much you'll need in the future.
Keep in mind that while the sections listed above are the conventional elements of a business plan, your plan should reflect the kind of business you wish to start.
Making the most of your plan
If you are struggling to find the time to complete your plan, it can be tempting to hire an expert to help. However, Ferriolo cautioned that immediately outsourcing the task may deprive you of some of the benefit.
"I honestly think the best course is to try tackling it yourself," Ferriolo said. "You get familiar with what is needed, and you learn your own strengths and weaknesses. Then, if you decide you need help, you'll understand the value of what you're getting."
It is also critical to avoid the temptation to overstate numbers or expectations in an effort to help secure financing. While the ploy may fool some, experienced banks will do their own projections before offering you a loan. If your plan lacks adequate research or contains purely speculative numbers, it could hurt, rather than help, your prospects.
Finally, remember that the business plan should be revisited as your business grows.
"Don't just make the business plan and use it for funding —really benchmark your company against it,"Ferriolo said. "Reference the plan monthly and quarterly, and revise your research and estimates as you proceed. Being accountable to the vision you set forth will help keep you in line and successful."
Templates and resources
Additional templates and resources are available at the following sites:
• Bplans
• Entrepreneur.com
• SCORE.org
• Small Business Administration
• Liveplan
A side-by-side comparison of the best business plan writing software is available on our sister site Top Ten Reviews.