If there is no business plan in place for your company, you might want to consider creating one. A business plan can help you clearly outline your company's purpose, operations, strategy, and goals.

Does Your Company Need a Formal Business Plan?

Not all businesses require a formal business plan, but it is particularly important if you are applying to banks for loans or seeking investors or business partners.

  • By presenting an overview of your company, a business plan can be used as a sales tool to potential investors.
  • By taking the time to evaluate and document all aspects of your business, a business plan can demonstrate to banks or potential investors that you are committed to your company's success.

Advantages of Business Plans

Preparing a business plan for your company helps you evaluate all aspects of your business. Some examples include:

  • Helping you clarify your company's plans and future goals, such as possible growth or expansion.
  • Making you consider every aspect of your business. For example, you might realize that your workforce lacks certain skills, and you can plan to hire experts to fill those gaps.
  • Allocating financial resources as needed, helping you avoid obstacles that might cause your company to fail.
  • Studying your target audience's demographics, which can help you plan business strategies and marketing campaigns.

Disadvantages of Business Plans

Disadvantages of business plans include:

  • Business plans don't guarantee that your company will succeed. For example, bringing in lower revenue than predicted.
  • Some business plans aren't flexible enough to adapt to market changes.
  • Revenue expectations might cause you to overspend in other areas.

Contents of a Business Plan

A business plan lays out all the information a banker or potential investor needs to know about your company. Some information to include in your plan:

  • Your company's mission statement.
  • A description of your company.
  • A description of your company's management structure.
  • The goods and services your company provides.
  • Important milestones for your company.
  • Your plans for marketing your company.
  • Market analysis and customer demographics.
  • Your company's strengths and weaknesses.
  • How your company differs from its competitors.
  • Your company's cash flow over the past several years.
  • Your company's projected revenue.

Are Business Plans Effective?

There have been several studies analyzing the effectiveness of business plans. One study, conducted by William Bygrave of Babson College, determined there was no significant difference in the performance of businesses launched with or without formal business plans.

One point many experts agree upon, though, is that securing funding for your business almost always requires a formal business plan. While businesses that have enough capital might not need formal business plans, any potential investors, banks, or government-backed lenders expect to see one.

Preparing a Business Plan

When you create your plan, its presentation is an important consideration. Your plan should include all the pertinent information, but also be clear and concise. Formal business plans shouldn't be excessively long. While there is no set length, many experts agree that concise plans have a better chance of being read.

There are tools available to help you prepare your business plan, such as spreadsheets and software applications, but some experts feel that these tools overemphasize the financials. As a result, many experts feel that a business plan's financial section should be significantly shorter than these tools usually provide.

A more contemporary way of presenting a business plan is to use digital slides instead of white paper. These slide presentations are easier to distribute and present to large groups of people. Also, the chances of your presentation being read are more likely because these digital slides tend to be more colorful and interesting to look at. These presentations slides are typically easier to read because each can only contain a few bullet points.

Consider an Informal Business Plan

If your company isn't looking for money, you might consider an informal business plan. An informal plan doesn't have to be fancy or comprehensive because no one outside of your company will see it.

An example of an informal business plan is a spreadsheet that contains quarterly objectives. Reviewing these objectives regularly and updating them as needed helps you keep your company on track.

The objectives of an informal business plan should be measurable and focus on quality, such as:

  • Sales goals.
  • Cash flow expectations.
  • Number of orders completed.
  • Implementing a new process.
  • Expanding your workforce.
  • Website improvements.

If you need help with business plans, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.