Creating a Business Plan

Every successful small business needs a business plan that maps out the company's future. The business plan helps keep everyone in the organization on the same page about the small business's goals. It also serves as your company's resume and can attract investors and capital. Having a clear vision that includes your pricing, mission statement, and financial projections will help your business succeed.

This article reviews the benefits of creating a business plan and how to get started on a business plan for your company. Other articles in this section can help you nail down the details. To learn more about starting a business in your area, consult with a local business attorney.

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Why Write a Business Plan?

Small business owners feeling strapped for time may ask: “Does the law require me to write a business plan?" The short answer is: “No, it does not."

A business plan is not a legal document. It's a tool business owners use to increase the odds that their business will be a success.

Prospective entrepreneurs must make many decisions about their businesses before they can open their doors to the public. Writing a business plan forces a new business to go step-by-step through difficult questions and do their own research. It requires you to think about business structures, marketing strategies, and financial forecasts. You will need this information to make good business decisions.

Your business plan will also provide a roadmap that keeps your business on track to meet its goals. Where do you want to be in three years? In five years? It should be in your business plan with any important milestones you hope to reach.

A business plan is essential if you are seeking investors and capital. Use your business plan to sell your business idea to potential investors. Include all the market analysis and financial information an investor needs to get excited about your business venture.

Types of Business Plans

Most business plans follow a template and include the same content. Different types of business plans may require more information or may focus on some topics over others. Most new businesses will need a startup business plan.

How To Create a Business Plan

The process of writing a business plan has great benefits in and of itself. It allows prospective business owners to research, gather data, and understand their customers and their product's place in the marketplace.

Information in this section will teach you:

• How to create a business plan
• The audiences you need to write for
• Which kind of plan you may need, and the components of each plan

You can use a business plan template or simply follow the guidance provided here on how to write the plan.

Line up a reviewer to proofread your plan. You can have a business consultant or counselor at the Small Business Administration (SBA) review it for you. You want it to be perfect when you show it to potential investors. Also, take a look at the Start-Up Checklist to ensure you've covered everything.

What's in a Business Plan?

A traditional business plan is both a marketing document and a plan for action. While different types of business plans have different goals and audiences, key elements of the plan will be the same. The article “Contents of a Written Business Plan" details exactly what should be included in each section of a traditional business plan.

A good business plan will include:

• Company description, mission statement, and an overview of your business
• Product line description, including new products
• Market research
• Competitive analysis and the value proposition offered by your product or service
• Business strategy and the things that give your company a competitive advantage
• Customer research, including potential customer demographics and target market
• Marketing strategy and a marketing plan to drive new business
• Management team information, an organizational chart of team members
• Sales strategy, including product or service pricing
• The legal structure of the business, intellectual property, and copyrights held

Financial plans and financial statements, such as financial projections, cash flow statements, balance sheets, income statements, a break-even analysis, and anticipated profit margins

The type of financial information you have available will depend upon where your business is in its lifecycle and the type of business plan you craft. A startup business will have projections rather than historical financial reports.

Don't forget the Executive Summary section of your business plan. It's often read as a stand-alone document. So, it pays to put extra time into making this the most inspiring four pages your audience will read.

Effective Marketing Strategy

While developing an effective marketing strategy isn't easy, it's an essential business plan component. It's virtually impossible to market to everyone all at once successfully. Concentrate your efforts where you think you'll have the most impact. Social media should be included in your strategy.

Financial Projections

The most important audiences for your business plan will focus on the financial projections and financial summaries provided in the plan. As a business owner, financial projections will help guide your business's development. For lenders and investors, these documents tell them if your plan is realistic and if you are a good bet for their business loan or investment dollar.

A breakeven analysis is one of the key documents you need to include in a business plan. What level of sales will make the company a profit? A breakeven analysis answers that question. It identifies when your business will be able to cover all of its expenses and begin to make a profit.

It's also important to identify your startup costs. This will help you determine the sales revenue needed to pay ongoing business expenses.

Talk to a Lawyer When Writing a Business Plan

A lawyer can help in many business scenarios. While you can certainly write a business plan on your own, an experienced business start-up lawyer can tell you how to avoid issues you may not consider. Before you visit, complete the Confidential Business Start-Up Information Questionnaire. Take it with you so you are prepared to talk.

Contact a business and commercial law attorney in your state to make sure your target audience will understand your business plan.