Purposes and Uses of the Business Plan

The business plan should define what the business will look like in three to five years. In that time the business should be functioning without the owner’s critical involvement, stable in cash flow, and making a profit. That status will define certain business goals stated in the business plan and the progress toward those goals marked by milestones also established by the plan.

When the definition of the business in three to five years is clear, it is possible and imperative to establish that the market for the services or products of the business will support that definition. Often this is a critical area where independent expertise and advice can be helpful in establishing whether the definition of the business in three to five years is realistic or wishful thinking. If it is realistic, then the market will support the projected growth of the business. The documentation of this should be in the business plan.

This timeline established by the business plan will suggest any number of questions. Will the business have adequate capital to accomplish the contemplated growth? How many employees will be needed to run the company? How consistent will the cash flow of the business be? Will the working capital requirements of the business be in proportion to growth or will there be other factors changing working capital requirements? What are the governance issues raised? Will the organization of the business have to change to accomplish the growth? How many offices will the business require? Will the business become a national business or a world business? These and other relevant questions should be stated and answered in the business plan.

The questions and projections will also impact thinking about business entity and tax choices. These issues and resultant decisions should be in the business plan.

The table of contents of a business plan should have the following sections: executive summary, company, services or products, market analysis, implementation, management, and financial. The executive summary, written last and read first, will summarize the business plan coherently and succinctly. The company section should describe the business entity to be used and the governance of that entity from a legal perspective. The services or products of the company should be described with their relevance to certain markets. The market analysis should show in an objective and authoritative manner that a market exists for the current production and the projected production of the company. The implementation of the plan should be described in sufficient detail to demonstrate that the contemplated plan can be executed and include milestones to measure the progress of the plan. The management positions both as to job descriptions and personnel should be described in detail. The financial section will contain projections of future financial experience including initial funding, cash flow, profit and loss, and working capital.

The business plan should be dynamic – constantly referred to and constantly revised. The question at each milestone should be: why did it not go as projected in the business plan?