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A business plan is a written document that defines the goals of your business and describes the means you will use to attain those goals. Every small business owner should prepare one, though in reality many do not. Although creating a business plan will take a lot of time, effort, and energy, it'll be well worth the trouble.
Why have a business plan? Formulating a written business plan will force you think about where you want your business to go and how you're going to get there. It will become, in effect, a roadmap for you to follow as your business grows and develops. And, of course, if you ever intend to borrow money or establish credit, you'll be asked to produce a business plan.
A business plan can be assembled in any number of ways. However, some essential components should be included in any plan, which are listed below:
- Description of the business. Describe the business, including what the products and services of the business are.
- The marketing plan. Describe the target market for your product and explain how you will reach that market.
- The financial management plan. Detail the costs associated with operating your business and explain how you will pay those costs. Will you need financing to start the business? If so, how much.
- The operations management plan. Describe how you will manage the core processes of your business, including use of human resources.
Those are the basics. For a complete explanation of how to put together an effective business plan, see our discussion of planning your business.