Today, I am going to briefly review the reasons for writing a business plan as well as provide an overview of the three main types of business plans.
Why Should You Write a Business Plan?
People write a business plan for many reasons. The most common reason entrepreneurs give for writing a business plan is to raise capital to help them start or grow their company. This reason is certainly valid, as most financing sources will not speak with you, let alone fund your company, without a business plan.
While a majority of our business plan software customers offer funding as the primary reason for purchasing our product, we have found that there are a wide variety of other reasons as well. These include:
• Ensuring that everyone in a company is working towards the same goals
• Convincing others in a company to allocate resources
• Creating a tool for running a business, monitoring its progress and making course corrections
• Managing growth
• Obtaining input from employees and investors
• Attracting key employees to a company
• Convincing key suppliers to provide credit
• Creating a brochure for a business broker to use in selling a company
• Attracting business partners
• Forming strategic alliances
These are all great reasons for preparing a business plan. Once you decide to write a business plan, your next decision is to determine what type of plan you need for your particular situation.
What Type of Business Plan Should You Write?
There are three general types of business plans, each written for different purposes or situations. A Complete plan and a Summary plan are intended for readers outside a company. An Operational plan is intended for internal use by an ongoing business.
A Complete business plan is necessary when you are looking to raise a significant amount of capital or you want to provide an external party a full picture of your business. A Complete plan can range from 15 to 40 pages or more (we suggest no more than 30 pages). You should explain your business concept in great detail, clearly state the specific request(s) you are making to your reader (money, partnership, etc.), and articulate what your company is bringing to the table to entice the party to move forward with you.
A Summary business plan is a much shorter document that highlights the most important information about your business and its direction. It should make clear the specific request(s) you are making of your reader and the purpose of the request. It is ideal when your request is simple or minimal, when you are strapped for time, or when you want to give your reader a preview of your Complete business plan. A Summary plan is also effective for small to moderate bank loans, attracting key employees, or for persuading friends and relatives to invest a few thousand dollars. A Summary plan is usually about 10-15 pages long and includes an expanded Executive Summary (generally 3-5 pages in length), a concise Financial Plan (usually 2-3 pages) and a few Supporting Documents, including your 5 year Income Statement, 5 year Balance Sheet and 5 year Cash Flow Statement.
An Operational business plan is an important document that is most often utilized internally by an established company. It is used primarily by a management team, board of directors and professional advisors. It’s an excellent tool for focusing and aligning the efforts of key managers toward common company goals, and therefore should be updated at least annually. It is a master blueprint to which you should tie your budgets and departmental plans. The key elements of the operational plan are the Company Direction, supported by sound plans for Products/Services, Marketing/Sales and Finance/ Administration.
Now that you have a good understanding of the reasons to write a business plan and the types of plans most entrepreneurs create, are you ready to get started? If you need some additional help or a tool to help you get your plan done, please be sure to take a closer review of Biz Plan Builder, our business plan software for Mac and Windows.
Good Luck and Happy Planning!