One of the first steps in a new venture is the development of a business plan. The business plan describes the business: its product or service, market, people and financing needs. A well prepared business plan serves several purposes:
- For the new business, it helps the owner determine the feasibility and desirability of pursuing the steps necessary to start a business.
- For the company seeking financing, it is an important sales tool for raising capital from outside investors.
- For an existing company, the business plan forms the basis of a more detailed operational plan and thus becomes an important management tool for monitoring the growth of the firm and charting future directions.
This outline represents a generalized approach. Business plans always should be tailored to the specific circumstances of the business and should emphasize the strengths of the proposed venture and address the potential problems and challenges to be faced. Although it is possible to prepare a business plan by merely “filling in the blanks” from a template (such as those available on the Internet), the likelihood of achieving desired results from doing so is small (e.g., how often do you respond to form letters?). Business plans prepared in connection with a loan application or for the purpose of obtaining venture capital financing will emphasize financial data and characteristics of the management team. The business plan should comply with the format requirements of the lender or venture capitalist.
Several organizations offer assistance in preparing business plans. These include Small Business Development Centers, SCORE organizations, Small Business Management programs, and others.