Creating Your Business Plan

By Pamela Gold

A business plan can seem daunting to most entrepreneurs. Lengthy and complex, a business plan generally takes a lot of time, thought, and effort. To simplify things a little, let's take a look at what a business plan is and why it is necessary before buying a franchise or starting any other business: A business plan is basically a written statement that says what you plan to do with your new business and how you plan to accomplish your goals. It's that simple! One of the reasons you will need a business plan is its necessity as you seek financial backing.

There's lots of work and thought involved in creating a business plan, but it is well worth the time and effort involved. Read on to learn more about creating your business plan.

What and Why?

Are you wondering why you need a business plan? Here's a simple explanation: A business plan defines your business and your goals. By going through the action of thinking through a business plan, when you open the doors to your business, you will be well-prepared for anything that might occur. -- You will understand how to allocate your resources, easily handle unforeseen problems, and make appropriate business decisions.

For prospective franchisees, a business plan will be an important part of your financing application because it describes your upcoming business and explains, in detail, how you will repay borrowed money, as well as how you will reach your goals.

For any soon-to-be entrepreneur or seasoned businessperson looking to expand, a business plan is an important step in the business ownership process. Business plans have three basic purposes: Communication, management, and planning. The plan secures loans, attracts business partners, and attracts investment capital. It will help you track and evaluate your progress towards your goals, and it will guide you through the development and growth of your business, while preparing you for any problems that might arise.

Who Needs a Business Plan?

Everyone who is starting or enlarging a business venture should have a business plan. This means that if you are simply working on a venture as a hobby, not to make significant money, you may not need a plan. Anyone who intends to spend a significant amount of time, money, and resources on their business needs one of these documents. It's often a misconception that only new businesses require one. In fact, when established businesses have a new idea which they need funding for, or plan to expand, they also need a well thought out plan.

The Basic Structure

A business plan's length can vary, depending on the complexity of the business and the intent of the document. From a page to over 100 pages in length, the typical business plan is about 20 pages long. Although no two businesses are or should be exactly alike and there is no exact formula for writing a business plan, according to the Small Business Association (SBA), a business plan should always include the following elements:

1. Cover Sheet
2. Statement of Purpose
3. Table of Contents
   1. The Business
      1. Description of the Business
      2. Marketing
      3. Competition
      4. Operating Procedures
      5. Personnel
      6. Business Insurance
   2. Financial Data
      1. Loan Applications
      2. Capital Equipment and Supply List
      3. Balance Sheet
      4. Breakeven Analysis
      5. Pro-forma income projections (profit and loss statements)
         This section should include a three-year summary with monthly detail for the first year and quarterly for the next two years.
      6. Pro-forma cash flow
   3. Supporting Documents
      1. For franchised businesses, you should include a copy of the franchise contract and all supporting documents provided by the franchisor.
      2. A copy of the proposed lease or purchase agreement for building space.
      3. A copy of licenses and various legal documents.
      4. A copy of resumes of all principals.
      5. Copies of letters of intent from suppliers.

You'll want to include information on the industry, your particular business' structure and products, and how you'll reach your goals. In the marketing section you'll want to include an analysis of potential customers and why they will want to buy your products and services, as well as an analysis of your competition and how you plan to beat them. For the financial data section, you might want to consider using an accountant or a software program to gain the most exact data possible.

Additional Resources

To further assist you in developing your business plan, visit the United States Small Business Association's website. There you'll find additional information on business plans and how to write them, as well as sample documents. Go to http://www.sba.gov for more information. Reading sample plans is a great way to get motivated, and they can give you a good idea of what information you need to provide in your own business plan and why (the thought process involved in writing a business plan).

Also, Bplans.com has excellent resources for the entrepreneur who's getting ready to write a business plan. From articles to tools and a newsletter, Bplans.com is an excellent resource for entrepreneurs. This website also sells software that can assist you in writing your business plan. Check out their website at http://www.bplans.com.

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With plenty of forethought and a solid business plan, you'll have a great start as you open the doors to your business. Best wishes as you embark on the exciting journey to business ownership.