If you don’t know how to write a business plan you’ll know by the time you finish reading this post. And it’s an important topic. The first requirement to launch a new business is establishing a written plan. And not just new businesses need them either. A business plan needs to be in place (regardless of how long a business has been in existence) if you want to own a successful small business. It’s a company’s guide to its own future.
You can hire a firm that specializes in writing business plans, or you can write your own plan.
Why you need a business plan
Any and every business needs a business plan. There are at least three reasons why your business needs one:
- As a road map for your business–a business plan can function as a tactical mission statement for your company
- For lenders—sure, lenders want to see financial statements, but most will also be keenly interested in the direction of your business and a business plan is a great way to show this
- For investors—most investors are more interested in where you’re company is going than where it’s been
The last item is especially important. If you’re looking to take your company to the next level and want to bring in investors to get working capital for your business you’ll need to have a strong business plan. If your business is fairly new you won’t be able to provide strong financial statements so you’ll need to offset that with a very well written business plan.
Why you might want to write your own business plan
The first reason is cost. A professionally prepared business plan can easily cost anywhere from a couple thousand of dollars to tens of thousands for complicated plans. If you’re an upstart business you need your capital to run your business.
And here’s another reason: as the owner of your business, no one knows your business better than you do; no one can describe and sell your business better than you can.
How many years should your business plan cover?
You can write a business plan covering any time period, but the most common is five years. That’s long enough to give lenders and investors some sense of comfort about the direction of your company, but not so long that it includes wholesale speculation about future events that can’t reasonably be anticipated.
What should a business plan include?
A business plan can include many different aspects of your business. It can be as detailed as you link. Some typical provisions include:
An executive summary. This is where you describe your business, its mission and its objectives.
A company summary. Here you provide more information on your company, including its history as well as recent financial statements.
Products and services. In this section you get specific about what it is your company does.
Market analysis. This is where you describe your target market, and how it is you are reaching it. You will also describe the competitive market environment.
Operations plan or strategy. Here you’re outlining how your company operates and why it is or will be successful. This can include competitive strengths, marketing and sales strategies, sales projections and previous successes.
A management description. This will introduce who is running key components of your business, and can include brief resumes of each.
Future projections. Here you introduce where you are taking your business, what anticipated risks are involved and how you intend to deal with them. You can include descriptions of your plans as well as projections as to where you expect them to lead.
Visual aids are always good to include in any section where appropriate. Colorful graphs and charts can often express what words can’t.
Practical guides to writing your own business plan
If you do decide to write your own business plan, you need to get at least a little help. You may be an expert in your business, but you probably aren’t an expert at writing business plans. In addition, you want to be sure your plan will be consistent with what lenders and investors are accustomed to seeing.
Start with a web search for “business plan templates”, and find a template that works for you. There may be a fee for the template of anywhere from $20 to $100, but that’s small in comparison to what you’d have to pay to have it done professionally. You can get free templates on some sites as well, but if you do be sure to get them from multiple sources to be sure that everything you need is included.
Keep your business plan up to date
Many people think that business plans are primarily for upstart companies, and while it’s true that new ventures are the most reliant on them they can benefit established businesses as well.
As a business owner you never know when you’ll need capital for expansion, so having a business plan that’s regularly updated is always advised. Also, business plans are a way of putting your company plans into writing as a guide for you and your employees.
Carefully consider if you would be better off writing your own business plan, or if you might be better off paying a service to do it for you. If you’re looking to save money, you may want to try doing it yourself. If you achieve the desired result—a loan or investment money—the time you spend writing up your own will have been time well.
Neal’s note: Thanks Kevin for another great post. I strongly believe that you should create your own business plan. This will force you to understand your business even better than you already do. Then, it would make sense to have an expert go over it and point out how to improve your plan. I would go to Elance.com to find someone to go over my plan. This could save you money, provide the professional input you want and still give you the deep review of your operations.