Past Meetup

Learn How to Write a Solid Investor Business Plan

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Creating a solid business plan takes time and energy. You may be asking: "Why do I need a business plan?" or "Why go to the trouble of documenting a business idea that I know will work?" The answer is that you significantly increase your chance of success if you chart your course with a written business plan.

A well-written business plan can provide two distinct benefits.

First, it can serve as the vehicle to convince potential investors or lenders to provide the financial backing needed to start your business.
Second, it can serve as an important management tool, providing a blueprint and step-by-step instructions for transforming your ideas into a profitable business, providing goods and/or services to the selected market.
Remember that no two business plans will look alike.

There are a number of key considerations that will play an important role in shaping the content. These considerations include whether you're writing the first plan for a new business or business opportunity, or writing a plan that updates or supersedes an already existing plan. Your business's current status will have a significant impact on the type of planning that's needed. An ongoing business might require a plan that relates primarily to a new market that it wants to enter, or a new product that it wants to introduce.

Our discussion of the value of a business plan addresses the issue from two angles: the benefits of a plan and the events that make it appropriate to create a plan.

Know the Benefits of a Written Business Plan

Everyone who opens his or her own business has a plan, however informal. The camera store clerk who decides to open a photography studio may not have a formal, written plan outlining the steps to be taken. Hopefully, however, at some level she has organized the relevant information, performed her own analysis of the market, and decided that she can make a living by starting out on her own. Perhaps she has been moonlighting by photographing weddings and other special occasions and the demand for her professional services seems sufficient to support her without the camera store job.

What steps did she take to reach that decision? Hopefully, at a minimum, she sat down and tried to compile a list of what it would mean to leave a salaried position and take on a free-lance career. At the top of the list would be a comparison of the net income from free-lancing to the net salary at the camera store. That would involve estimating the number of jobs she could reasonably expect, the cost to provide the required services, and the prices she could charge. The irregular timing of payments versus a steady income might present personal cash flow problems. The availability and cost of benefits would also rank high, as would all the intangible factors that differentiate self-employment from employee status.

However, even if our hypothetical camera store clerk has a well-thought out plan entirely in her head, at some point she will need to communicate it to others, such as suppliers, professional advisors, and perhaps a banker from whom she wants to obtain a line of credit.

Having a written plan is an essential communication tool, since it's not practical to explain your operations in person each time someone needs to know who you are. Moreover, the odds are that our budding entrepreneur has not thought out every significant aspect of her future business. Going through the process of creating a written plan can help ensure she hasn't missed any significant factors that can cause her fledgling business to fail.

When Should You Create a Written Business Plan

If you're just starting out in business, a written business plan can help you organize all the pieces that will have to come together to make your business a success. A business hoping to expand its operations in some way can achieve the same benefits. A well-established business trying to grow out of a business-as-usual rut can use a plan as a modeling tool to examine various options before committing to one.

Many small business owners feel that they can keep track of everything without the need to write it down. A written plan, after all, is really just the embodiment of the internal planning that every business owner does anyway. However, the structure of a written plan provides makes it more likely that you will consider all relevant factors and that nothing important slips through the cracks.

What justifies the additional time and energy you'll spend creating a written plan that presents a blueprint of your business idea? An increased chance for success. More specifically, a plan can be

A reality check when you first examine the feasibility of your business idea, which forces you to consider all relevant factors.
Your business's resume, which will be vital in dealing with lenders and outside investors, and an important tool in negotiating with vendors and attracting employees.
A timetable for operations, helping you to coordinate all the diverse activities that go into running your own business.
A modeling tool that helps you evaluate the variable factors that affect your business, so you can better prepare to deal with situations that may arise as conditions change.
A vehicle for tracking the progress of your business.
A blueprint against which you can adjust operations in order to achieve your goals.
A starting point for future planning.


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