Even though many entrepreneurs never bother with them, business plans can benefit all types of ventures. Whether you're a freelance graphic designer or the next great high-tech disruptor, writing a business plan can help you seize opportunities, understand strengths and weaknesses and avoid costly mistakes—if you do it right.
Here are a few guidelines that demonstrate how to write a business plan that can provide real value and help your business grow.
Cover the essentials
A business plan has a standard format and should include some essential ingredients, especially if you're seeking financing. Typical sections include a company description, service and product lines, marketing and sales, market analysis (who are your competitors?), financial projections and leadership and management. If you need funding, you should detail your request: What you need, how you intend to use it and future requirements.
There's no preferred length when writing a business plan. A more established business might need 100 pages, while a new business with little history might need 20, says Gina Abudi, the president of the Abudi Consulting Group in New Hampshire. Also, be sure to mention if you and your partners are investing your own money. “Investors are not going to invest unless other people have some skin in the game," says Abudi, the co-author of The Complete Idiot's Guide to Best Practices for Small Business.
Business owners should avoid the temptation to exaggerate financial projections. “Growth is always a touchy part because you want to show significant growth, but you don't want to show growth to the point that it's just not even achievable," Abudi says. You also should use the business plan as an opportunity to assess your own lifestyle and income requirements: What do you need to survive and live comfortably, and are you willing to make the necessary sacrifices to get your business off the ground? “Think about what is really reasonable and feasible," Abudi says. “I like to do that by saying, 'OK, here's the ideal, perfect world. Now let's be realistic. Let's take it down a notch.' "
The U.S. Small Business Administration and the nonprofit Service Corps of Retired Executives (SCORE) can help you with your business plan. The SBA has small business development centers geared toward helping entrepreneurs all over the country, while SCORE has more than 11,000 volunteers in 320 chapters that can connect you with mentors in your community. Both groups offer free advice and feedback on your plans “You really want to do that because you wouldn't want to go in looking for funding and find your plan is not that great," Abudi says.
You also should seek input from lots of voices. If you already have employees, hold a strategic planning session that gets everyone involved, from top managers to the guy sweeping the floor. “Nothing engages people more in the business than feeling they are part of it, and they're contributing," Abudi says.