A business plan is an indispensable tool for an entrepreneur and not only because of its importance to the fundraising process, but because of how it helps businesspeople crystallize their strategy and evaluate their process. These are the three major reasons to create a business plan if you are a hopeful entrepreneur.

Fundraising

Most literature on business planning focuses on the need for a plan to encourage external investment into the company, whether it is through loans or equity investment. Most funders will not consider putting money into a company without seeing a well-written, convincing business plan. An entrepreneur must make sure the plan speaks in terms the funders will understand, and meets their requirements for the qualifications of the management team, funding requested, and financial return.

Strengthening Strategy

When strategy is an amorphous concept, existing in the minds of the various company founders, it is loose and perhaps even contradictory. It also does not necessarily make use of the best research on the market, customers, and competitors. The process of creating a business plan requires the entrepreneurial team to go through this research and analysis systematically, creating a better foundation for strategy. Having to write down the strategy also creates an opportunity to make sure all of the founders are literally on the same page about what they intend to do. If they are not, fruitful discussions can be started which are better to get out of the way at this early stage while plans are still much more flexible.

Evaluating Progress

Finally, while the action plan outlined in the business plan is being implemented over the first months and years of operation, the business plan is both a guide and a means to see how well the results of the business stack up to the projections made early on. The pro forma financial statements can make this type of evaluation very easy. Make sure that the original pro formas are kept in spreadsheet format so that actual financials can be laid out alongside them. If your budgeted targets are saved in your accounting software, such as Quickbooks, this kind of comparison can be even easier and variances can be measured automatically.

The business plan never gets stagnant. It is dynamic and goes on changing throughout the business’s life. Therefore, it must be updated at least twice a year. Did you know that many business owners change their plans every quarter of a year? You should do the same.

This sort of a methodical approach can help you keep a check on your progress. For example, if you look at the projected milestones towards the goal and list out the ones you have achieved and the ones you haven’t, you will be able to a set an accurate time limit for reaching these milestones.

You might come across aspects of the initial plan that haven’t worked out and thus need to be changed or gotten rid of completely. At the same time, you might see just where you have achieved beyond expectations. Again if the sales from catalogs have turned out to be far better than expected, you would want to change the plan to emphasize more on catalogs, perhaps get it published twice or three times a year instead of what the usual plan was.

Once you have your plan in front of you, you can check if your financial projections have been achieved or exceeded. This helps you to find other ways to change the sales and marketing strategies or maintain the status quo. Not only can you change your plan to guide you, but you can add new products line or a new service, alter your plan to show a different method of operations.

Again an Example, you may call for an increase in the number of orders just so you can serve the clients or customers better or something else of the kind to help out the business to work smoothly and bring in more profits. Businesses have to forcefully make changes due to a number of external factors and they should be included in the business plan.

You may wish to read more at: Sample Business Plans and Business Plan Templates.

So, what’s your plan look like? You know, the plan for your business for the year? The quarter? The month? You do have one right? How will you know if you are successful?

Don’t panic. If you are like the majority of small business owners, you are not very good at planning. Not that you couldn’t be, you have just never taken the time to create a plan for your business. In fact, you wince at the thought of sitting down and trying to create a business plan. But that is where the problem is. There is a major difference between writing a business plan, and creating a simple plan for your business.

The traditional business plan is good for starting a complex business, or getting funding for a rapidly growing company, but for small and medium sized businesses, what they need is a simple business plan to run their business. A strategic, living document about what they expect to happen in the coming months or years, where they expect their business to go, and how they intend to get there.

Traditional business plans are all about theory, and possibilities and the unknown. They want you to spell out what you do know, so you can make a determination if you should start the business, or if the bank should give you the loan. But for an existing small business trying to make this year better than last year, all the while focusing on the actual running of the business, who has time to really think about all of the minutia that goes into a traditional business plan.

What most small businesses need when it comes to planning is a simple business plan that focuses on what they need to do now. It does not have to be a large, multi-page binder with appendices and graphs and charts, it can be a single page document that is all about the here and now.

There are some primary elements that your simple business plan should have. It should have a vision statement that describes what the business should look like, what it does and who its customers are or what market it serves. It should have detailed goals and objectives, or measurables, to help you measure the progress and success (or lack of…) of the business. It should also have a section on your strategies or tactics that you will employ, and it should also have a section that covers what the immediate projects or action plans are.

All of these elements should fit onto a single page. And the best part of a simple business plan like this one is that it can always be kept up to date. The plan should be used to run your business and when changes happen, and you know they will, update the plan to reflect those changes.

There is a difference between a traditional business plan and planning for your business. Use a simple business plan, on a single page to run your business, and see how much more focused your business can be.