Everyone has heard about business plans but how many people actually know how to prepare one? This page tells you the basics of preparing a business plan.

What Is A Business Plan?

A business plan is a set of thought processes and management decisions which deal with all aspects of a business venture including:

• Your basic product or service
• Your customer base
• Your major competitors, and how you differ from them
• Your marketing methods and sales forecasts
• Your company structure and operation plans
• Your management team
• Your financial projections, and
• How your business will be financed.

A business plan can be described as:

• A "plan of action," which outlines your business goals and how you are going to achieve them.
• A "road map," or "game plan" for your business.

A business plan focuses on your goals and objectives and lays out where you have come from, where you are now, where you are going, and how you are going to get there.

Business plans are usually prepared for start-up situations. However, existing businesses should also prepare one every 1 to 3 years to "regroup," plan for the future, or to update plans in response to changing business conditions.

Whether you are starting a new business, expanding an existing one, or trying to make your business more profitable, if you want to increase your chances of success, write a business plan!

A business plan is prepared for two main reasons:

• For yourself, to help you get the whole plan in place, and then to evaluate your business idea.
• To sell your idea, to attract other people to become involved with your business.

Evaluating Your Idea

By clearly identifying goals and objectives, a business plan establishes a direction for your company, and provides a means of measuring performance against the goals and objectives that were set. By setting priorities, the business plan provides focus.

Preparing a business plan forces you to think about the following:

• Your customers
• Your market area
• Your competitors
• Your pricing strategy
• Other market conditions under which you will be operating

A business plan helps you determine, in advance, if your business will be profitable.

The business plan also forces you to deal with potential problems before they occur. It therefore acts as a "sanity check" for your new business idea, by giving you the opportunity to take one last objective look to see whether or not your idea makes sense.

It forces you to deal with areas that you may not be familiar with, such as marketing, budgeting, and finance. By being exposed to these areas before you start your business, you will be improving your management skills. More importantly, it will help you understand your strengths and weaknesses, and point you in directions to address your weaknesses.

Selling Your Idea

A business plan is also a selling document. It is a vehicle for selling your company, both to yourself and to other stakeholders. Other stakeholders may include your business partners, potential investors, bankers, and venture capitalists. As a selling document, a well written business plan will convince both yourself and others that your business can be successful.

A well written business plan will lay out both your strengths and weaknesses and will demonstrate how you plan to deal with potential problems. By sitting back and objectively identifying potential problems before they occur, and determining in advance how to overcome them, you will be well on your way to ensuring your company's survival.

No two business plans are alike, and the format you decide to use for your business plan will depend on your circumstances. However, all business plans should be written in a concise, structured format.

The contents of your plan will vary according to the type of industry you are in, or whether you are a retail business, service, manufacturing, or wholesale. For example, a business plan for a manufacturing company will emphasize plant and production issues, while a business plan for a retail business will be primarily concerned with areas such as location and customer convenience.