What Is a Written Business Plan?

A business plan is a valuable tool for organizing factors essential to the success of a business. It can be used by an existing business, but is considered absolutely essential for a start-up, since the plan should show the strength and weaknesses in order to determine the odds of success.

Function

Business plans are used by management in business, government and non-profits for strategic planning in order to set the goals of the entity and determine how to reach them. A business plan is required by many third parties whenever a business must explain itself and its capabilities, for example, when seeking investors and requesting financing.

Timing

A business plan should always be created prior to investing funds in a new business since it helps to clarify the goals and set parameters for achieving them. In the course of running a business, the plan should periodically be revisited in order to review changes in the market and the business goals.

Format

The actual format of a business plan depends on the entity, its goals and the purpose in creating the plan. For example, a plan that will help internal management deal with a changing market will emphasize the new environment, current capabilities, and discuss means of adapting. A plan designed for funding will emphasize the financing, size of target market, market conditions, and show how the influx of cash will ensure success, allow the business to repay the loan and/or provide investors with a solid return on investment.

Preparing the Plan

The person(s) responsible for creating the plan must gather information from many different sources. Specific input will depend on the goal of the business plan but may include background information on the industry, the specific company and similar ones, the current and potential market, internal operations, managerial goals, and accounting.

Contents

The business plan must be well-organized and clear. It should include a cover page, table of contents and an overall summary. The sections following may include, as applicable, a description of the business, industry background, marketing environment including the primary and potential competition, operational factors, business resources, management, financial capabilities and needs and, in the case of a start-up, the breakeven point and potential.

Effects

The business plan enables management to organize its thinking to enhance changes of success or to avoid beginning down a path that will lead to failure. For investors or fundraising, it should serve to clearly explain the business and its potential to make it credible.