Sponsored by the U. S. Small Business Administration
Business planning is all about taking your dream and turning it into reality. A business plan is the document you create when you take an idea and work through all the factors that will have an impact on the successful startup, operation, and management of the business. Smart entrepreneurs plan because they understand that it increases their chances for success. Sure, there are successful businesses whose owners fly by the seat of their pants and never create a written plan. But they succeeded despite the lack of a formal plan, not because of it.
Those who have decided to embark on a new enterprise have probably already taken some steps, however informal, to confirm the viability of the new business. Creating a written plan is the next logical step in that process. For example, a business plan can be the vehicle that carries your new idea from the conceptual and planning phase down the road to the building and operational phases. Or, it may help to establish your business's credentials for purposes of obtaining bank financing or investment by future partners. A plan for an existing business may just deal with a single aspect of your business, such as a new product introduction and its impact on financial management and other ongoing operational issues
A well-developed plan can serve as one of your most important management tools. A good plan will provide a blueprint and step-by-step instructions on how to translate your idea into a profitably marketed service or product and is an absolute necessity if you need to secure financing.
No two business plans will look alike. There are a number of key considerations that will play an important role in shaping the content. These considerations include whether you're writing the first plan for a new business or business opportunity, or a plan that updates or supersedes an already existing plan. Your position in the life cycle of the business will have a significant impact on the type of planning that's needed.
Everyone who opens a business has a plan, however informal. At some level the relevant information must be organized, the market analyzed, and a decision made that you can make a living with the business. If the entrepreneur has previous experience in the business experience will serve to guide the planning.
How do you make the decision? Hopefully, you have compiled a list of what it would mean to leave your current position and start the business. At the top of the list would be a comparison of the net income from your current position to that which your plan projects. (Does a plan make more sense now?) At this point you may reevaluate how comfortable you are with you forecast of sales and expense. The irregular timing of payments versus a steady income might present personal cash flow problems. The availability and cost of benefits would also rank high. So would all the intangible factors that differentiate self-employment from employee status.
Even if you have a well-thought out plan entirely in your head, at some point you will need to communicate it to others, such as suppliers, professional advisors, and perhaps a banker. Having a written plan is an essential communication tool, since it's not practical to explain your operations in person each time someone needs to know who you are. Moreover, the odds are that you have not thought out every significant aspect of your business. Going through the process of creating a written plan helps make sure any, potentially disastrous, factors haven't been overlooked.
Many small business owners feel that they can keep track of everything without the need to write it down. A written plan, after all, is really just the embodiment of the internal planning that every business owner does anyway. However, the structure a written plan provides makes it more likely that you will consider all relevant factors and that nothing important slips through the cracks.
A well-prepared business plan can be:
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