Is a Business Plan Really Necessary?

You bet it is. Whether you want to borrow millions or only thousands; whether you've got the greatest idea of the 21st century or whether you just want to start up a small home based business, you need a Business Plan. One of the great myths is that you only need a Business Plan if you are going to borrow money from a bank. Not so. To go into any business requires a decision by you to do it. The Business Plan will help that decision. It is first and foremost for you.

Going into business entails serious financial risk, a major investment of your time, even disruption to your home and family. You must understand your products, your customers, your competitors. You must be able to sell yourself at a minimum, as well as your products and you must have sufficient financial knowledge to start and run your business. The only way I know to be almost sure that your business will make it is to prepare a Business Plan for yourself first and later perhaps for others, including lending institutions.

In past articles, I have defined business as "the process of taking raw materials, goods or services from a beginning point and adding value along the way to the final user." It is the value you add that entitles you to your profits and it is the Business Plan that clearly sets out how you plan to add value.

Make no mistake about it, the only reason why franchisees are about twice as successful as independent start-ups, is that they have a clear and proven Business Plan. Their plan contains all the elements that you must know before you begin your journey on the road to business ownership.

The Business Plan is a written document that clearly and convincingly demonstrates that your business can sell enough of it products and services to make a satisfactory profit for yourself; provide sufficient profit to attract lenders and potential investors and finally to provide sufficient cash flow to service debt and pay investors. That is what business is all about.
Tip! No matter how good a communicator you are, you will never be able to convey your vision for the business as successfully as a perfectly put together Business Plan. It provides a clear understanding as to what you want to achieve.

Each year thousands of Americans try to realize the dream of owning their own business. Many of them fail. A Business Plan could have helped them before they opened their business.

a.. The business Plan produces the marketing plan, identifying your buyers and your competition as well as forecasting your revenues.

a.. The Business Plan clarifies the financial needs of the business and causes you to prepare a projected balance sheet, income statement and most important of all, a CASH FLOW statement, the most important start up financial statement and the only predictor of success that I know.
Tip! Financial data should be referenced in the Business Plan or as handout; not as a slide.

a.. The Business Plan must be an objective and realistic view of your industry. It will be a requirement if you seek financing.

a.. Finally the Business Plan must be concise so that it will be read, accurate to insure your credibility, reader friendly, focused to make your points, complete, leaving no questions unanswered and believable.

But most of all, it must demonstrate financial performance. It must clearly set out your mission, your objectives, your vision. Where do you want to be at some point in the future? You should spell out your strategies, that is the pathway or methods you will employ to get you from here to there, to achieve your objectives and finally to describe the steps along the way, your "to do" list. If you don't or can't articulate them, you won't do them.

When this is done, what a compelling statement it makes. I know why my business exists, it's reason for being, and I know where I am now and where I plan to go. I know the strategies I will employ to get me from here to there. I know the "things" I have to do to make it happen.

There are plenty of places to research a format for the Business Plan. The Internet has an abundance of them. The SBA and SCORE have a number of them. The format, as long as it is logical, complete and readable, is unimportant. What is important is that you clearly set forth the mission of your business and the financial performance you expect.

Deciding to take the time to do your Business Plan is the first of many decisions you will have to make as a business owner but I promise it will be the best decision you can make to insure your success.
Tip! A business plan might not be as good an instrument to convince your potential investors(banks, venture capitalists etc), as the personal conviction, enthusiasm, charisma and passion you demonstrate for what you want to do! For instance, the “experts” among them, who the rest might look up to for assessment of the viability of your proposed venture, may not reckon with your idea if it is new or unusual.

"Ed" McMahon's career includes the small business and corporate world. With degrees from Villanova Univ. an MBA from the City University of New York and completed postgraduate work at the Stanford University, he is the author of the book" UnderstandingSmallBusiness (http://www.Understandingsmallbusiness.com) Ed has extensive small business experience. He has counseled several hundred small business prospects in the principles of small business. He drafted the FTC disclosure statement for a major convenience store chain currently operating. He has held senior posts as executive vice president of a mid-size oil company, headed up the polymer division of a major chemical company and was taught "UNDERSTANDING SMALL BUSINESS" workshops employed as an officer of a major consulting company.
Tip! Myth: Friends and family are the best sources of feedback and advice on my business plan.

Ed has taught Small Business workshops at the business college level, and for the past 11 years. For 6 years his monthly column on small business has been published in a regional business journal. He can be reached at USB@houston.rr.com.