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Is a business plan worth it? You bet

Q: Steve - Do I really need a business plan? If so, how do I write one? -- Jen

A: No, you do not have to have a business plan. Is it a good idea? Yes, but many small businesses get by just fine without one.

But consider: Would a pilot ever fly from New York to Albuquerque without a flight plan? Of course not. His flight plan tells him which direction to head, how much fuel he needs, important landmarks to look for on the way, and so on. It lets him know whether he is headed in the right direction or is off course.

Well, that is what your business plan amounts to. It's a flight plan for success. It helps you understand whether you are headed in the right direction, what to look out for on the way, and whether you have the resources to make it.

Essentially, a business plan:

• Helps you think through what you want and how to get there.


• Helps you identify your market, competition and possible roadblocks.


• Gives you a better understanding of your business' finances-or how much you need to make it.

Yes, writing a business plan can be a lot of work, but it doesn't have to be. Your business plan only needs to be as long and complicated as required for the task:

• If this is just an internal document for you and an employee or two, then it can probably be a fairly simple document, maybe five to 10 pages, though it certainly can be more detailed.


• If you will be using your business plan to raise money, either from an investor or a bank, then it will need to be pretty comprehensive. A standard business plan may run 30 pages or so and covers everything someone needs to know to properly analyze your business-its history, finances, strategic advantages and so on.

Whether you will be writing a mini business plan or a more thorough document, the idea is the same: Fully explain various aspects of your business, detail how they work and possibly interact and analyze what you need to move forward.

The basic elements of any business plan are:

An executive summary: Often written last, the executive summary is probably the most important part of your business plan, a virtual "greatest hits" of what is inside. Investors and loan officers especially focus on the executive summary.

A business description: What is the business exactly? What are you selling?

The management: Your management team is critical, not only to the success of your venture, but also to your ability to raise money. Investors and lenders will look very closely at the background and experience of your management team (or you, if you are the team).

An industry description: This section requires a lot of homework. Here you will discuss the macro trends of the industry you are in, where it is headed, and how you fit in. You can get this sort of information from owners in similar businesses, industry Web sites, trade associations and magazines and books.

Your competition: Who is your competition and what is your plan for beating them? Analyze what they are doing right (and wrong), and how your plan bests them.

An exit strategy: Maybe your exit strategy is to stay in the business as long as you want. That is fine. Maybe it is to sell the venture in five years for $1.5 million. That works, too. Whatever your strategy, explain it here.

An appendix: This section contains documentation that substantiates the plan and projections, including:

• Personal and business references


• Your banking information and personal net worth statement


• Your lawyer, accountant and business insurance information


• Contracts, orders, letters of support and so on

Want some more help? You can download a free e-book on how to write a business plan here, from the Microsoft Startup Center. That may help, too.

A business plan can be revised periodically. Either you will get funding with it or you will know your business better. Either way, you win.