How Important Is The Business Plan?


Your road map to business success.

Now, more then ever, a well thought out Business Plan is seen as a necessary tool for building a viable business. Whether you are seeking financing from a lender or plan on approaching the Small Business Administration for a loan guarantee, a well thought out plan of action is essential for presenting the formalities of the proposed venture. In today’s highly competitive marketplace, a formal operating plan may mean the difference between success and failure.

What is a Business Plan?

Simply put, a Business Plan is a written statement outlining how you intend to operate your enterprise into the future. While most new business owners have a general idea of how they want to run their company, those intentions are usually not formalized. As the business grows and new challenges emerge, the owner often needs to involve others in the venture. This is a time when the owner finds himself/herself under pressure to formulate a plan for future growth. Unfortunately this time period affords the least amount of time for planning.

The following are compelling reasons for developing a formal Business Plan.

A Road Map To Success

Very few entrepreneurs achieve their goals without first formulating a well thought out plan of action. Any responsible entrepreneur will spend the time necessary to record his/her expatiations for the business. Good planning guarantees preparedness for the future thus reducing challenges to their lowest denominator. Reducing challenges means less risk and a higher probability of success. It just makes good operating sense to plan ahead when risking time, money and resources.

Predetermined Check Points For Measuring Progression Of Goals

Like a traveler sets off on a journey and plans when to reach his/her destination, a Business Plan also serves as a guide for the journey. With a Business Plan in hand, an owner can set check points in which progress can be measured and adjustments made. As each step in the business plan is reached, an evaluation is made. Further funding can be applied for physical expansion, upgrading equipment or more employees. As each goal is satisfied and a cycle of activity is completed it signifies the beginning of new goals. New goals, mean an extension or reevaluation of the plan.

The Business Plan Is A Vehicle For Involving Others Into The Venture

Even if there has been no need for employees, a sound Business Plan sets the stage for bringing new people into the venture. This assures everyone understands the goals of the business and what is expected of them. Far to often the owner thinks he/she can commutate with their small staff of workers only to find out their employees don’t understand the overall plan. A Business Plan provides needed direction for everyone to stay on the same track. The planning process also assist in the expatiation of meeting goals to the employees and reducing the possibility of any unscheduled crises.

The Importance Of Developing A Loan Application

A good Business Plan will be required by the lending institution before financing can be had. Evan if you want to apply to the Small Business Administration a lending institution must first approve the loan. The SBA will guarantee the loan up to 80% but the lender will still need proof of capability. The question is, are you capable of running a business? The lender will ask for proof of experience, collateral and a statement on how you plan on paying back the loan if the venture fails. Even if the lender is a friend of yours, your relationship is strictly business as he/she demands assurance of repayment. You must provide them reasonable assurance you know what you are doing and how you plan on doing it.

The Business Plan Provides:

A picture of past experience

A plan for the future

Makes financial needs clear

Identifies possible threats and provides reasonable solutions

Serves as a communication tool

Establishes direction and sets company goals.

Do not take anything for granted. Be prepared for anything that can happen before it happens. If you put it off until something happens it will cause a disruption in your ability to preform. Every section of the Business Plan should be considered. First settle on your legal description, name, product or service and logo. Then find a good location and bring everything together with your Business Plan.

Here are some of the things a Business Plan should contain.

The Business

A. Description of Business

Form of Ownership


Products or service offered

History of past experience

What is the Niche served

Need for niche – demand

Growth potential

Longevity of product of service

B. Marketing





C. Management/Personnel

Financial Data

A. Pro forma Cash

Detail by the month for first year

Detail by Quarter, Second & Third years

Notes of Explanation

B. Pro forma Balance Sheet

Income Projection (profit and loss)

Detail by Month, first year

Detail by Quarter, Second & third years

Notes of Explanation

D. Financing Requirements

E. Insurance Requirements

All expatiations should be considered when writing a Business Plan. Project one year, five years and ten years. Break down each segment into its lowest denominator. If you want to make x amount of dollars, how many sales will it take and what will each sale consist of? Find the answers and put them on paper.

Plan to be productive and successful. Contemplate any and all possibilities good or bad. Consider the “what if” factor. Seek professional advice and don’t sell yourself short. Being self-employed is not for the faint at heart. It is a tough road to take. You will have to work hard spend long hours and put up with a lot of rules and regulations. It is not the answer if you are seeking freedom from an employer. Self-employment will suck the energy from you but if you planned right you’ll be able to spend some time with the family after a few years.

Source by Donald Yates

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