Your Business Plan
A Solid Investment in Your Company's Future

By John Troland, Owner of The Business Plan Group

A recent AT & T Small Business Study found that only 42% of the businesses surveyed used a formal business plan. Simply stated four of every ten businesses did and 6 did not! In this day and age of a fast paced economy one might expect that as many as nine out of ten would effectively use a business plan. It has been said for years that most businesses do not plan to fail; they fail to plan. It should be categorically stated that EVERY business should have (and more importantly USE) a business plan. A common misconception with some business people is that unless a business is seeking capital it does not need a business plan. Considering that a major reason for business failure is management incompetence (translated perhaps not utilizing a business plan) let's consider then some valid reasons for using a business plan and some important pointers in their preparation.

A business not seeking capital would utilize a business plan to establish goals and objectives for the business over a number of years, probably two to five. In addition the plan would provide a tool to track actual results against projected revenue and expense figures. Adjustment could then be made in revenue or expense projections if needed.

A new startup business would utilize a business plan in two ways. One would be as just mentioned after the business becomes operational. An obvious need exits if the startup business is seeking capital from an angel investor, venture capital source or some lending institution. The investor/lender must see the company's plan for becoming operational, making a profit and having the ability to repay the money borrowed. In addition the investor/lender must be convinced that both the business plan makes sense and cents (will be profitable) and that the company's management team can execute the business plan in the desired fashion.

An existing business could use a business plan in one of several ways. First, in addition to those reasons already mentioned, it could use a plan to obtain financing to purchase real estate, machinery or equipment. In addition it might use a plan in conjunction with seeking a loan large enough to payoff an existing loan and that would provide additional funds for some purpose(s) as stated in the business plan.

Another use of a business plan by an already existing business might be to obtain capital to be used to acquire another existing business. In this instance a strong case would have to be made in the business plan that the operating income of the combined operations of the two companies would meet the projections as set forth in the business plan.

In writing a business plan these are some important pointers to keep in mind. First the financial projections should be realistic, conservative and attainable. Pie in the sky numbers will be both obvious and detrimental in the long run. Secondly both market and competition research should be detailed. Thirdly these should be a dynamic, turn-me-on executive summary. Fourthly keep the length of the plan in the 30-40 page range; long winded plans, may actually turn off a potential investor/lender. Lastly assemble the best management team possible -after all they are the ones who will both execute the plan and work to achieve the desired results - the continued economic vitality of YOUR business.

View a Suggested Outline for Writing a Business Plan

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