Writing A Business Plan

A business plan is a document describing a company's goals and means to achieve them over the next few years. It's like a resume for job seekers and is essential to any business owner, manager or entrepreneur considering opening a new business, expanding an existing business or raising capital or equity.

A good plan is a roadmap for the future. It well describes your company, your products, your financial projections and evaluates how you can manage your business and take it to success. It's also a salesperson and should be able to sell your business in the following occasions:

1. To obtain business financing. Lenders and venture capitalists usually want to see your company's past, current financial statements and future projections if you want to be taken seriously for financing. It's much like a hiring manager asks job applicants for a resume. However, keep in mind that lenders usually want to be assured that they are going to be paid back; while equity investors are looking for a much higher return that they could not get in other more established businesses.

2. To secure strategic alliances. Strategic alliance is a partnership between two companies to share resources in a specific project such as joint research and marketing. Small companies usually can get benefits from large companies in such partnership.

3. To recruit a management team. For a start-up company, a business plan might be the best way to convince a top-notch executive. It's the resume of the executive from the other point of view.

All above being said, plans for your business are also noted for often quickly becoming out of date. One common belief among business owners and managers is that the actual plan itself may have little value. However, the process of planning can help the manager gains a greater understanding of the business and of the options available.

Real Life Example

Frank Carney, a founder of Pizza Hut, said that he and his brother started the business by accident in 1950s. By 1970s, the company grew explosively and went public. At that time, they almost lost control of the operations so they decided to get a written plan. The business plan helped the company get back on growth track and also make the company attractive enough that PepsiCo eventually acquired it.

For more information about writing a business, check out some formats and samples.