What is a business plan and why do I need one?

One of the most important things to do before starting your business is to plan and research your idea to ensure that your business has a favorable chance for success, will meet your expectations, and will provide an adequate reward for the risk involved. Sound business planning will indicate whether you should proceed with investing your financial and other resources, as well as those of lenders and/or other investors.

The business plan helps you evaluate your business on paper to determine if the idea is worth the investment of more time and resources. It precisely defines your business, identifies your goals, and serves as your firm’s résumé. It describes the products and services you will sell; the customers to whom you will sell them; the production, management, and marketing activities needed to produce your offerings; and the projected profit or loss that will result from your efforts. It is critical to validate your beliefs before committing to a lease, leasehold improvements, purchase of real estate, equipment and inventory, etc.

Another important benefit of the planning process is that you will project the amount of financing needed for start-up and the early stages of your business. This gives banks and investors the information needed before a credit decision is made, making the business plan a useful tool in securing capital before start-up.

The business plan is not a static document used only for short-term planning and financing; it is a constantly evolving strategic tool that should be applied to management decisions throughout the life of the business.

Posted in: For Businesses, ILSBDC