MoneyWatch: October 2007

Writing a Business Plan

Business plans are used by entrepreneurs for various reasons. The most apparent and most important is to obtain financing for a start-up. Other reasons are more internal to the company; allowing owners to set clear goals and plans that can often help them stay focused and on track. There has however been an ongoing debate questioning the importance of the traditional lengthy business plan, and the impact it has on the overall success of the company.

In a Wall Street Journal article published in 2007, a study by Amar Bhide, a Professor at Columbia University, found that 41 percent of Inc. magazine’s 1989 list of the 500 fastest growing private firms didn’t have business plans and a follow-up in 2002 found very similar numbers. However, a local professor at Case Western Reserve University, Scott Shane, was quoted in the article saying that many of the studies that disregard business plans as being important don’t look at business failure rates, but only at businesses that have survived. Shane also adds, “It’s not always necessary to have the 60-page business plan, some people get a little caught up in the perfection of their plan.”

No matter what side of the debate you are on, one thing is absolute, business plans are necessary to obtain financing and founders should present potential investors with a detailed business and financial plan. The key is to find out the type of plan that works best for your proposed business. You also should know your possible investors and their desired outcomes. Most often investors want to see that there are customers for your business and how you will market yourself to reach this audience. Stated differently, they want to see a favorable return.

According to the Small Business Administration, you should be able to answer the following four questions before you begin writing your plan:

What service or product does your business provide and what needs does it fill?
Who are the potential customers for your product or service and why will they purchase it from you?
How will you reach your potential customers?
Where will you get the financial resources to start your business?

Regardless of how long your plan is, many experts agree that the Executive Summary is the most important page in your plan because it is the first thing that a potential investor will read. This summary can be as short as one paragraph and should not be more than a few. You can really make your business stand out here by highlighting your fabulous management team, the uniqueness of your offerings, and how the business will make money. If it grabs their attention they will read on and zoom in on the parts of the plan that interest them most.

Click on the links below for more tips and services that can help you write your plan.

Resources

Key Bank: Business Plan Basics
Fifth Third Bank: Why have a business plan
SBA: Write a Business Plan
SBA: Sample Business Plans
SCORE: 5 Tips for Making the Most of Your Business Plan
Business Plan Writing Tips
Business Plan Frequently Asked Questions

Local Services for Business Plan Writing Assistance

Baldwin Wallace College: Center for Innovation and Growth
Myers College: Business Planning Workshop Series
Cleveland SCORE- SCORE offers free business advice and counseling to business owners as well as offering low cost workshops and seminars. They also have offices located in Akron and Canton.
Business Advisors of Cleveland- This group of retired business people offer a wide range of free services to entrepreneurs, small businesses, and community service organizations

Support for MoneyWatch is made possible by Charter One Foundation.

Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration.