When one of my friends was asked about the business plans for his new company, he replied, “I don’t have any.” He started several companies in his 20-year period as a businessman and none of them have ever succeeded for long, although he is a millionaire today.
Does this mean that he is a poor businessman? Essentially not!
This means that my poor friend didn’t ever realize the purpose and the worth in creating a business plan, which is often the case with many new entrepreneurs.
So, what exactly is this Business Plan and what makes it so important for every business owner?
Here is all what you must know about an effective business plan.
Business Plan – An Introduction
A business plan is your formal ‘calculation’ of the way you want and will run your business. It is a formal declaration of your business objectives, reasons they are achievable, and plans for accomplishing them. It may sometimes also include background information such as the organization or team endeavoring to reach those goals.
Business Plans serve as a framework for your business and provide standards to check whether you’re reaching your goals. They are a key to help you think through your business and keep you on track.
Business Plan – Its Length
Greg Nelson of SCORE Naples says, “A business plan needs to be long enough to address all the key areas so that the reader is not left with serious questions, concerns and red flag.” He further says that business should be able to present sufficient business plan in less than 20 pages.
However, simple businesses can probably complete their task in 8-10 pages. In cases of complicated market research, one can place much of the supporting information in appendices, which can make the principal plan shorter, more concise, to the point and more effective.
However, according to the book Portable MBA in Finance and Accounting, p. 261-2, “For a business plan to raise debt or equity, 25-40 pages, and “less is more.”
However, some experts believe that a business plan should be measured by its readability and description.
Business Plan – Who need it?
You need a business plan if –
• You are running a business
• You are applying for a business loan
• You are looking for a business investment
• You are looking for business partnerships
• You want to communicate with your management team
In short, everyone who is associated with a business must have an effective business plan.