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March 24, 2009

Why do a Business Plan

Are Business Plans Necessary?

Yes, business planning is a crucial element in the short and long term success of a business. Most business plans define the “Who, What, Why, Where, When and How” of a business venture. Although, you do not need a business plan in order to start a business, doing a plan will help you think your business idea through and allow others to ask questions you may have overlooked.

The complexity of the plan is normally determined by the purpose of the plan. There are three types of business plans.

1.      Simple business plans may be nothing more than a quick reference to make sure you did your due diligence and provide a general direction for the business. Simple plans still define the: who, what, why, where, when, and how a business will begin. The Entrepreneur’s Advisor recommends all businesses have at least a simple plan before any cash is invested into a new business venture. If you are seeking funding, it is highly unlikely that this form of plan will help you.


2.      Complex business plans are often used to raise capital and attract investors or partners. Each plan is tailored to meet a specific objective(s). These types of plans should be professionally done and can be expensive. They should contain most of the following and perhaps additional sections depending upon your business idea:

Ø  Executive Summary (written last and is only one page)

Ø  Company Product or Service description Industry Information

Ø  Market Research and Analysis (Who is your market and what size is the market)

Ø  The Economics of the Business (operating margins, breakeven analysis, cash flows, all your financial expectations)

Ø  Marketing Plan (strategy, competition, sales tactics, pricing, marketing, distribution)

Ø  Design and Development (ex: Intellectual Property)

Ø  Management Team (biographies, organizational charts)

Ø  Assumptions and Critical Risks

Ø  Forecasted Financials (sales projections, balance sheet, income statement, start up capital, operating budgets etc…)


3.      True business plans are the third type of plan. They differ from the simple and complex plans because the plan is a complex yet living, flowing document that is flexible to changing factors and needs. It is not a stagnant document and it is updated on a regular basis. These types of plans become the foundation and guideline for 3 or 5 years plans, operating plans, strategic plans etc…


Still have questions about business planning? Ask us to help you determine which type of plan is best suited for your business. The Entrepreneur’s Advisor can assist you in the writing or reviewing your business plan. Subscribe today at: