Every new venture should have a business plan. A business plan is the formal written expression of the entrepreneurial vision, describing the strategy and operations of the proposed venture.The business plan also goes by other names, depending on its intended audience.Presented to a banker, it may be called a "loan proposal". A venture capital group might call it the "venture plan" or "investment prospectus".
The advantages of writing a business plan far outweigh the costs. The purpose of the plan is to enable the top executives of the firm to think about their business in a comprehensive way, to communicate their objectives to individuals who may have a stake in the firm's future, to have a basis for making decisions, and to facilitate the planning process.
Entrepreneurs should undertake the task of preparing the business plan personally. Although outsiders - consultants, accountants, and lawyers - should be tapped for their advice and expertise, the promoter or the initial top management team should be responsible for the writing. Personally drafting the plan will enable the entrepreneurs to think through all aspects of the proposed business and ensure that they are familiar with all the details, for they will have to make decisions about the new venture and be responsible for those decisions. Moreover, investors expect the founders to be involved in and knowledgeable about the proposed enterprise.
The Benefits of Business Planning
The business plan can personally benefit the entrepreneurial team. Founding a new business can be enormously fulfilling and exhilarating, but it is also an anxiety-ridden and tense experience. Usually a great deal of money is at stake, and the consequences of poor decisions can affect many people for a long time. In developing and writing a business plan, the entrepreneurial team reduces these anxieties and tensions by confronting them in advance. By projecting the risks of the new venture into the future, the team comes to grips with potential negative outcomes and the possibility of failure. The knowledge that comes from this experience can reduce the fear of being taken by surprise by problems that could have been foreseen and provided for at the very outset.