What Is A Business Plan And Why Is It Important?

What is a business plan and why is it important? A business plan is basically a comprehensive look at what is everything that is involved and entailed in the business. The business plan is a written description...

The business plan is a written description of all the aspects of the business, which is intended to convince you, the business owners, as well as anybody outside reading it, either a lender or investor and so on, of the legitimacy of the business. That it is really a business and not just a hobby. Part of the business plan is where you want the business to go. The things included in the business plan are a description of the business, what the business does, who owns the business, how the business does what its going to do, who are the people involved in making the business operate both from the standpoint of doing the business as well as managing the business. It's also an understanding of the market in which the business operates, the size of the market, type of customers that the business is likely to attract, the location of the customers, location of the business, the things that differentiate the business from other similar businesses.


Why is somebody going to want to buy something from your business? Who is your competition? What does the competition do well? What don't they do well? How you can satisfy needs that the competition doesn't and whether the competition is perhaps vulnerable. A business plan is also the financial plan for the business. The budgets for the business, operating plans, sales forecast, expense forecast, and cash flow information should be included because everybody needs to know. The purpose of being in business is to make money. And you know the only thing you can spend is cash. So you need a good cash flow statement for the businesses as well.




A business plan is basically a comprehensive look at what is everything that is involved and entailed in the business. It's hard to define what a business plan is, it's really the road map for where you, the owner of the business, wants the business to go and how you are going to get there. It's like the saying, "If you don't know where you are going, any road will get you there." So you really want to know where you want to go, where you want to take the business, how you are going to get there in great detail, to be sure you are fond of everything involved in running the business and operating the business.

Tonight I am giving a two and a half hour seminar on business planning. So we are trying to squeeze all that into one question, that's a big question. Business plans are important for two people - the person whose business it is and anybody who is going to be asked to put money in the business in the form of either a loan or investment. It's important because it really sets the stage to show that you are organized, that you know what you want to do, and that you have a way to accomplish your individual goals for your business. And also to show that it really is a business, not just a hobby or something you are going to do in your spare time and that it can make money. That's the whole reason people go into business - to make money - and you the business plan is a document which shows you how it's going to happen.

The business plan has to demonstrate two things. Is there enough money to pay back the investors and is there enough money to pay the person who is doing the business? It is not enough just to produce a business plan to show the bank. You have to prove that the business can pay back the investors.

© High Speed Ventures 2011