Understanding Business Plans
A business plan is a fundamental document that any startup or existing business needs to have in place prior to beginning operations and as operations continue. It is a dynamic living, breathing document that changes as the business changes.
Banks, investors and venture capital firms indeed often make writing a viable business plan a prerequisite before considering providing capital to new businesses. At some point, a business plan crosses a line and becomes a private placement memorandum (PPM) which addresses the securities law issues that arise when a business seeks capital to start or grow the business.
Operating without a business plan is not usually a good idea. In fact, very few companies are able to last very long without one. There are definitely more benefits to creating and sticking to a good business plan—including being able to think through ideas without putting too much money into them.
A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. The plan will address the accounting, financial, tax and legal issues particular to the company.
Business plans, even among competitors in the same industry, are rarely identical. But they all tend to have the same basic elements, including
- an executive summary of the business and
- a detailed description of the business, its services, and its products.
- It also states how the business intends to achieve its goals.
The plan should include an overview of the industry of which the business will be a part, and how it will distinguish itself from its potential competitors.