Why write a business plan? There are several reasons why you might want to write a business plan.

1. It is a tool for obtaining financing.

2. It will help unite venture partners in a common goal.

3. It can serve as a feasibility study.

4. It will serve as a goal and blueprint for your new business.

Of all of the purposes listed, the last one is the most important. According to the Small Business Administration, 95% of all businesses started, fail within the first 5 years. One of the main reasons for failure is a lack of direction or goals. A business plan will give you that direction or goal, if it is used properly.

The Foundation For Writing A Business Plan

There are several things you need to consider before beginning to write:

1. Consider whom you are writing the plan for.

2. Have a firm idea of what product or service you are offering.

3. Do market research to determine the demand for your product or service. Learn who your potential customers are.

4. Decide how you are going to sell your product or service to your potential customers. It does not matter how good your product is unless you are able to sell it for a profit.

5. Determine where you are going to get the money necessary to start your business. You must have enough financial reserves to pay the expenses until you pass the breakeven point and start making a profit.

Writing Your Business Plan

After you have finished your research and background preparation, it is time to list the reasons why your business will succeed. You are essentially writing a report to yourself. Your report must address all the areas that are obstacles to business success. Your business plan must be able to convince a reasonable person that you can succeed. It is also your goals for success. Without a goal, your aim is haphazard and prone to failure.

Business Plan Outline

The following is an outline suggested by the US Small Business Administration:

Elements of a Business Plan

1. Cover sheet

2. Statement of purpose

3. Table of contents

I. The Business

A. Description of business

B. Marketing

C. Competition

D. Operating procedures

E. Personnel

F. Business insurance

II. Financial Data

A. Loan applications

B. Capital equipment and supply list

C. Balance sheet

D. Breakeven analysis

E. Pro-forma income projections (profit & loss statements) Three-year summary Detail by month, first year Detail by quarters, second and third years Assumptions upon which projections were based

F. Pro-forma cash flow

III. Supporting Documents

Tax returns of principals for last three years

Personal financial statement (all banks have these forms)

For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchiser

Copy of proposed lease or purchase agreement for building space

Copy of licenses and other legal documents

Copy of resumes of all principals

Copies of letters of intent from suppliers, etc.

Summary

The suggested research is the basis for writing your business plan. The business plan you are writing will be the blueprint for your new business. Consider what a house would be like if the builder did not use a blueprint. You want your business to be well built like the house you live in. Just as a carefully planned house will last many years into the future, you want no less for your business. If you do not take the time necessary to develop your business plan, then you still have a plan. It is a plan for failure.