One of my favorite types of projects is working on small business plans with clients. There is an air of excitement as they work out their ideas and put their dreams on paper. I always think that I might be witnessing a birth of another future corporate giant. Some of those ideas are compelling, others seem unattainable, and yet the confidence and certainty my clients exhibit leave me with no doubt that they will succeed.

The Challenge of Writing a Business Plan
As excited as these entrepreneurs are about their ideas, for many of them the actual task of writing things down in a business plan format is very hard. They would rather get started already, develop their product or service, find a location – do all the things a typical small business owner does. They have such inner clarity about every single detail and yet communicating all of it in writing – in a business plan format – seems completely against their nature. It feels too structured, almost unnecessary.

Obtaining Financing
And yet, especially it today’s world, it is necessary. Most of the time the purpose for a small business plan is to obtain financing. No matter which group you are thinking of approaching – venture capitalists, commercial lenders, potential investors – they will all want to see a formal, written business plan.

Even though many people use business plans primarily, and sometimes only, as financing tools, they tend to write them in a way that puts the venture in too optimistic a light. Even if it gets you the cash you wanted, it will not help you succeed, because if the business has not been well thought out, or if the risks are too great, it will fail.

A realistic and objective business plan that also conveys your excitement about your business idea and your confidence in reaching your goals will have a much better chance of not only getting you the financing you need, but also fulfilling the other purpose it was meant to serve:

Planning a Business
Yes, that’s it! A business plan is a “planning tool”. That is its primary function and purpose. And it does this so well that shrewd business people like investors and bankers use it to determine who will get financed by them and who will not.

And you too will benefit from using it the most when you see it as such and not only as a sales tool.

It is a structured approach to refining your ideas about your business and devising a plan of action taking into account all aspects of the future enterprise: marketing, personnel, operations and finance. It helps you translate your ideas into actionable goals and it helps to predict your financial resource needs and financial results.

As you fine tune it, you will find out that it allows you to make many mistakes “on paper” and saves you from their consequences in the real world.

Monitoring a Business
The hardest business plan to draft is your very first one. Why? Because all you have are estimates and assumptions. But after a few months of operations, you will have some real numbers and you can update your plan at that point. Planning process has to be dynamic and on-going. A plan is not something you do once and put on a shelf. If it is to you, you have not realized the tremendous value it has for your business.

It should be an integral part of your management. Use it to compare your actual results to what you were anticipating. Analyze the deviations and understand them. Perhaps what you did was better than what you planned, perhaps not. Either way, you can learn from this comparison and refine your planning and your operations even further.

Any time you plan to introduce a new product, enter a new market, change the management structure, you should first prepare a business plan for the scenario you are envisioning. And don’t think this means too much time involvement for you. After all, you are just a small business owner. You cannot behave like a large corporation with a separate planing department, right? Wrong…

Large companies have large planning departments because they have learned the value and necessity of planning, but you need it just as much, if not more, because as a small business owner you do not have the reserves that can carry you through a sales slump or a bad business mistake.

This is what I always tell my clients – small businesses need all the sophistication of large companies. They actually need it even more, they just need it scaled down and adjusted to their size.

So you have found that the Internet is a vast resource of templates for various business forms, including business plan templates. If you think you can use some of them and you are looking at downloading, take extra caution. You need to be sure that they will serve your particular purpose, especially if you are eying to use a business plan template. Not all businesses are the same, so you need to make sure that while you use the template, you should also customize templates enough so that they speak on your behalf, and communicates your identity and value proposition accurately.

To help you work on a business plan, it pays to know the major parts that business plans typically contain. A business plan is touted as the most crucial document that a business owner or entrepreneur will ever develop before he launches his business. The business plan sets the direction of the company, especially during its start-up years. It is also the document that investors look at when they are deciding whether or not to put their money in the business venture. As such, business plan templates should contain the structure of the company, its revenue and growth goals, as well as its future plans.

So what are the parts of an effective business plan?

The first section should contain the executive summary. Here, you sum up the important points of the entire business plan in such a way that it piques the interest of investors who don’t have the luxury of time to read through the entire document. The gist of the business plan should be laid out in a three- to five-minute read, underscoring the key issues and should not be more three pages. While it is presented first, the executive summary is prepared last, when the rest of the plan has been drafted.

The next section is a description of the business. The purpose of this section is to provide detailed information about the company, as well as the products or services that it plans to offer. This is also the place for putting your company’s mission statement and milestones.

The third section contains the market analysis, which aims to present the company or business venture in the light of the market situation. Here, you talk about how you position your company in the market landscape so that your readers will have a better understanding of the prospects of your business. Make sure to include a discussion of your industry, your target markets and your competition.

Next, your readers, especially the investors, need to know that the people who will lead the company can be trusted with their money. As such, the business plan has to have a section on the management team. In addition, investors also need to have an understanding of the process of your business. As such, your plan has to have a section on your operations, including your go-to-market strategies.

Investors also have to apprised of the risks that they will be taking if they do decide to put their money on your business venture. As such, have sections on critical risks and financial projections, where you describe in detail the risks that are avoidable and expected, as well as how these risks relate to your ROI projections.

Finally, the best business templates are those that have room for appendices. These appendices provide supporting documents to the claims that you made in the entire business plan. They come in handy once the investors have initially decided favorably, and would like to scrutinize the plan better before they sign on the dotted line.

Business plans are a necessity if you are trying to get finance for a new business. Most investors or loan companies will not look at you twice unless you show them a detailed business plan.

Many people don’t bother with a plan as they feel it is not necessary. But you mainly need a business plan for yourself. The actual process of creating a business plan will do you wonders for the long term success of you business. As you work through your plan you will come across a list of questions which will highlight areas of your business which you may have overlooked or which need more research. Even if your not asked for a business plan it is well worth doing one and referring back to in the weeks and months to come.

So what makes a good one?

A good business plan should be a long term strategy for you business. It should include everything that you will need to do to run your business, including what the actual activity will be, what resources you are going to need. You need to detail your employees, money, time, equipment or stock.

Your business plan should include

o your business idea – what you do, sell etc
o who your target audience is
o your projected revenue and expenses for a year
o list of your major competitors and how they are different to you
o marketing plans and what results do you expect from them
o how much you expect to sell and when
o resources (e.g. money, employees, premises, equipment)

With your business idea you need to explain clearly why you are different from your competitors, what you are offering that is different and why your target audience should use you. Include how much your products or services will be and explain any market research which was undertaken. If you haven’t done any market research you should stop writing your plan and so some.

In the marketing section you need to explain who needs your product, where the purchasers will be based, your competition and why you are better or different. Also if is worth mentioning any emerging or growing trends in the market including impending changes and what the effects will be to your business from these changes.

If you have a team of people as part of your resources you should explain what each persons job role will be, what their strengths and weaknesses are and if there are any gaps how you will fill them.

The financial projects are very important and you should try to ensure they are as accurate as physically possible. Ensure you explain what your likely profit and expenses will be including any assumptions.

The more research and planning you do the better chance your business has of succeeding. So get researching and get planning and you will soon be reaping the rewards.