Building Your Business Plan

Most entrepreneurs recognize that a business plan is extremely important to the start-up phase of a business, but don't always see the benefit a current business plan is to the long-term running of a business. A business plan, although similar in basic parts, should be specific to the current situation of a business. While it may be tempting to turn to business planning software, this is often an expensive mistake as these tools utilize shortcuts that can short-circuit the important process of creating the business plan; this can leave a business with a cloudy picture of current needs and future plans.

The first function of a business plan is to help a business gather resources, namely loans. Bankers and other investors tend to scrutinize the Executive Summary of a business plan first. This section is no more than a single page which details the key points of the plan without becoming a mere summary or introduction, although it will do both. Because it does detail the basic information it should be left until the end when creating a business plan.

If your business plan is primarily for internal use, and not for attracting investors, your executive summary will serve to guide your management team through decisions and keep on track. It is a quick reference that sums up the main points of your plan; this can be invaluable when assessing the success of goals and ensuring decisions align with company goals.

Next, potential financers look to ensure there is a consistency between the marketing plan and the forecasts for revenue. A successful marketing plan should be built upon careful and thorough research of the market, the industry and your target customers. A solid plan will address both strengths and weaknesses in all areas as well as propose methods for dealing with crisis. However, if your plan is for internal use only the forecasts will not be as important as the marketing plan. This isn't to say they offer nothing of value internally. Financial information is key to understanding cash flow which is often the make-it or break-it point for many businesses.

Among the entrepreneurs' least favorite portions to create are the forecasting sections. This is where the picture created by the marketing plan is put into action with numbers. The revenue forecasts are based upon the price of your product and the quantity - a fairly simple equation, but the two most uncertain elements in your plan.

While business planning software will walk you through these steps, it will not always organize them in a way that is most advantageous to thoroughly understanding your enterprise. This thorough understanding, more than anything else, will allow you to speak fluently with investors and to react intelligently to changes in the business.