If you're thinking of starting a new business or expanding an existing one, you need a plan. And not the back-of-a-napkin kind of plan, but a full-blown business plan that details the objectives, the finances and the risks of your endeavor. That's the first thing any small business lender will ask to see as you look for capital to get your idea off the ground. But beyond trying to land a loan, there are other compelling reasons to construct a solid business plan.
The Benefits of Writing a Business Plan
First and foremost, a business plan acts as a sanity check. According to statistics from Bloomberg, eight out of 10 new businesses fail in the first 18 months. While there are myriad reasons for those failures, the obvious truth is that most of those businesses shouldn't have been started in the first place.
Figure 1: LivePlan lets you create a visual "pitch sheet" that summarizes the concept and goals of your business.
Sadly, a good idea and a passion to make it reality don't always—or dare we say, often—guarantee success. A sober business plan can help you beat the grim odds by forcing you to spell out each detail. After all, you may feel that a food truck selling tacos to those college students can't lose. A business plan may show you that to cover the cost of the truck, insurance, taxes, labor, and supplies—and still make a profit—you have to sell 500 tacos an hour at $17 per. An inconvenient dose of reality, to be sure, but it's better than discovering that bit of news after you've sunk your money—or worse, your relatives' money—into a pipe dream.
Moreover, having a plan in black-and-white serves as something tangible that you can show to people you trust for honest feedback, so they can point out flaws in your thinking. And as you grow your business, your business plan serves as your roadmap, a touchstone you can refer to lest you start to lose sight of the big picture.
Tips and Resources for Writing a Small Business Plan
As with most things, there's a right way and a wrong way to go about putting together a business plan. "The biggest mistake budding entrepreneurs make is that they avoid going through all the necessary steps of creating the plan," explained Dr. Billie Blair, an organizational psychologist and president and CEO of the international management consulting firm Change Strategists, Inc.
"The business plan should be a comprehensive guide to how the business will be designed, developed, structured and run," said Blair. "It should, in fact, be your first strategy plan for the company. Anything less than that won't give you enough beginning analysis, or enough guidance to see you through your first year." The company offers a booklet on business plans, which is available for a nominal fee on its site.
Other helpful resources come courtesy of your tax dollars. The U.S. Small Business Administration offers a Business Plan Tool on its site for registered users. The tool includes a step-by-step guide that walks you through creating your plan. You can complete each section at your own pace, and return to it any time to make changes. When it's ready, you can output your plan as a PDF file that's easy to share with others, such as a mentor or counselor from an SBA resource partner such as SCORE, the Small Business Development Center (SBDC) or the Women's Business Center (WBC).
Small Business Planning Software
On the commercial side, Palo Alto Software offers a range of products and services that teach you what a good business plan should be, and then help you create it. Start with its resource site, Bplans.com, which has a host of helpful articles, tips and tools to help entrepreneurs create, and then run, a better small business.
On the biz-plan front, the site offers a complete guide to planning a business, sample plans, a free business plan template, advice on how to write a business plan, plus common business plan mistakes (such as focusing on profit rather than cash flow).
Figure 2: Business Plan Pro has more than 500 plan templates in a wide range of industries that you can use as your starting point.
If you're looking for more assistance, Palo Alto Software offers two products you should consider. Business Plan Pro ($99.95 for the Standard Edition, $159.95 for Premier), the leading desktop application for creating business plans for 10 years, claims 1 million businesses served. The program includes more than 500 sample plans that cover a huge range of industry types. Simply pick the one that's the closest fit for you and start customizing. Most importantly, Business Plan Pro ensures that your plan follows the format that banks and investors expect.
Not a writer? Not to worry: You can tweak the text found in the sample plan, so you aren't stymied by blank-page syndrome. Not an accountant? Business Plan Pro has you covered there, too, with built-in financial and spreadsheet functionality that explains the various terms and does the math for you. All you have to do is plug in the numbers.
Not omniscient? Well, you had best become so if you're going to run a small business. But until that day comes, Business Plan Pro delivers an error-checking feature that double-checks key areas of your plan to help make sure your plan is realistic. There's also an entire course on business planning, hosted by Tim Berry, a noted authority on the subject.
Business Planning in the Cloud
Palo Alto Software also offers an online version, LivePlan ($19.95 per month, or $11.66 per month if billed annually). It delivers the same guidance, samples, financial tools and advice as its desktop counterpart, broken down into easy-to-follow steps that you can update from anywhere. You'll be able to see your revenue forecasts, personnel plans, budgets and more with just a click.
Of course, you're not about to go handing out copies of your entire plan as a conversation starter, so LivePlan delivers a handy Pitch feature. It lets you build a one-page infographic that summarizes your business opportunity—the equivalent of the 30-second elevator pitch—but with a longer shelf life. The online version also makes it easier for multiple stakeholders to see and modify a plan, since it lives in the cloud and not on someone's PC.
Figure 3: Enloop walks you through creating your business plan step-by-step, and issues an EPS rating to let you know how your plan stacks up.
Another cloud-based business plan service provider, Enloop, comes in four versions (ranging from free to $24 per month if paid annually), and offers a wealth of handy features. The AutoWrite feature walks you through a step-by-step process to define the particulars of your business. It then creates a plan for you, which you can then edit and format as needed and output as a PDF.
Enloop will also generate investor-ready financial forecasts from the numbers you supply, as well as supply you with its unique Enloop Performance Score (EPS). This patented feature provides a FICO-like score for your business plan, updated on-screen while you're working on it. The score changes with your inputs, and is designed with safeguards to prevent unrealistic financial forecasts (like selling 500 tacos an hour at $17 per).
There's also a unique industry comparison of your company's potential, based on data from similar companies. The program will test your plan in three critical areas—cash flow, important financial metrics, overall score—and generate a report card that evaluates your company's forecasted performance.
Jamie Bsales is an award-winning technology writer and editor with more than 20 years of experience covering the latest hardware, software and Internet products and services.
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