Business Planning Frequently Asked Questions
What is a business plan?
A business plan is a written document that describes your business, its objectives and strategies, the market you are targeting and the financial forecast for your business. It will assist in setting realistic and timely goals, help secure external funding, help measure your success, clarify operational requirements and establish reasonable financial forecasts. Preparing you plan will help you focus on how your new business will need to operate to give it the best chance for success.
Why is a business plan important to my business?
Entrepreneurs, like you, are most likely to prepare a business plan when they are in the start-up phase of their small business (to secure financing) or when they are about to make a major change to their business. A business plan should be prepared and regularly updated for all businesses.
There are undeniable benefits to preparing a business plan, namely:
- it makes you think about your business, research options, recognize opportunities and risks, and test some of your expectations
- it helps you determine the cash needs of your business
- it equips you to seek financing from banks and/or investors
- it provides a benchmark against which to compare the progress and performance of your business
When should I write a business plan?
The sooner the better! However, it is never too late to write a business plan and, once written, it becomes a living document that should be updated regularly. It is important that you examine and anticipate as many relevant factors early on in the process, so that you are not taken by surprise later.
What are some common guidelines when preparing a good business plan?
To prepare a good business plan, you should:
- Take the time to really define your business objectives. Think about who is going to read the plan. The objectives can help you decide how much emphasis to put on various sections of your plan.
- Take your time to research your business plan. A business plan is only as good as the research that went into producing it. For example, you will have to do research in order to find out more about your industry, potential customers, competitors, sales and costs of doing business.
- Show drafts of your business plan to others. It can be very useful to get feedback on your draft business plan from various people, including people associated with the business and others.
- Write your own business plan. A common mistake is to copy too much information from a sample business plan. Your plan must reflect your objectives and should flow like a good story, with the sections working together to demonstrate why the business will be successful. Business plans that borrow too much information from other business plans tend to be disjointed, with some sections contradicting others and some key issues being overlooked.
- Make sure your financial projections are believable. For many readers, the financial section is the most important section of the business plan, because it identifies your financing needs and shows the profit potential of your business. A good financial plan will also give the reader confidence that you really understand your business. So, be sure to test how reasonable each of your expectations are. If you are overly optimistic or fail to take into account the full costs of running your business, your business plan will not be credible.
- Write the executive summary last. The executive summary can be the most important section of your business plan, because people will read it first and it may be the only section that is read. The keys to a good summary are that it should be short (two pages at most), it should highlight what is important in your plan and it should get the reader excited about your business.
Who should write my business plan?
Your business plan should be prepared by you, the entrepreneur. It is your business and therefore your business plan; so, you should take the lead in writing it. However, don’t hesitate to seek outside assistance from your management team, consultants, accountants, bookkeepers, copy editors and/or other experienced people.
