The Business Plan: Why, Who, What?

The importance of planning should never be overlooked. For a business to be successful and profitable the owners and managers must have a clear understanding of its customers, its strengths, its competition, and must have the foresight to plan for future expansion. Whether yours is a new business or an existing business expanding, taking the time to create an extensive business plan provides you with greater insight into your business.

An effective business plan requires you to be objective, critical and focused. The finished project is an operating tool to help manage your business and enable you to achieve greater success. The plan also serves as an effective communication tool for financing proposals.

The are four major reasons for constructing a business plan are:

• The process of putting a business plan together is important; it forces the individual constructing the report to look at the business in an objective, critical and unbiased manner.

• It helps to focus ideas and serves as a feasibility study of the business's chances for success and growth.

• The finished report serves as an operational tool to define the company's present status and future possibilities. It can help you manage the business and prepare you for success.

• It is a strong communication tool. It defines your purpose, competition, your management and personnel. The process of constructing the plan can be a strong reality check.

Planning is very important if a business is to survive. An objective look at a business can help identify areas of weakness and strength. You may recognize needs that have been overlooked, spot problems before they escalate, and establish the path that leads to your business goals.

The plan is only useful if you use it. Ninety percent of new businesses fail in the first two years. Failure is often attributed to a lack of planning. To enhance your success, develop and follow a comprehensive, well-constructed business plan.

Finally, your business plan provides the information needed to communicate with others. This is especially true if you are seeking financing. A thorough business plan should have the information to serve as a financial proposal and should be accepted by most lenders.

Who should write the plan?

You, the owner of the business, should write the plan, whether you are using the business plan to seek financial resources or evaluate future growth, to define a mission or give guidance for running the business. You know the most about the business; and you have the most to gain from a well-constructed and insightful plan.

Some use software to assist in the formatting process. Consultants can be hired to assist in formulating the plan, but you must always do a majority of the work. Only you can come up with the financial data, the purpose of your business, the key employees, and management styles to mention a few items. So tackle the plan yourself; if you need further help in one area, then seek the assistance of a consultant.

The Product or Service

It is important for the reader to thoroughly understand your product offering or the services you currently provide or plan on providing. However, it is important to explain this section in layman's terms to avoid confusion. Do not overwhelm the reader with technical explanations or industry jargon that he will not be familiar with.

It is important to discuss the competitive advantage of your product or service. If entering a new market, explain why there is a need for your offering. If appropriate discuss any patents, copyrights and trademarks the company currently owns or has recently applied for and discuss any confidential and non-disclosure protection the company has secured.

Discuss any barriers that you face in bringing the product to market such as FDA approval, EPA or government regulations, etc. Other areas that should be covered in this section include:

• Is your product or service already on the market or is it still in research and development?

• If in development, what is the rollout strategy or timeline to bring the product to market?

• What makes your product or service unique? What competitive advantage does the product or service have over its competition?

• Can you price the product or service competitively and still maintain a healthy profit margin?