By Amy Fontinelle
Because writing a business plan forces you to look at your business in great detail, every business owner should really write a business plan no matter what type of business he or she is starting. But the main reason that most people are actually forced to undertake this significant task is that they want to obtain external financing for their business. A business plan is almost always necessary to obtain financing, whether you are working in a new business or an existing one.
Your plan should convey your enthusiasm for your business and present it in the best possible light. That being said, you should not use sales hype, exaggerate or attempt to hide past mistakes. What's more, your plan should openly and honestly address challenges that your business is likely to face. Addressing the potential downsides shows that you are being realistic; it also puts you in a position to head off problems before they occur, or avoid being blindsided if they do occur. If you know what might go wrong and think about how you might be able to fix it ahead of time, you may be able to turn a bad situation around quickly.
While it is helpful to consult books and websites on how to prepare a business plan and what essential components you must include, it might not be the best idea to use a prewritten template or software package to prepare your plan. (Read on to find out how your business can get the money it needs - even when the bank says "no", see 7 Unconventional Ways Businesses Can Borrow Money.)
John S. Reilly, a Dallas-based business-plan-writing consultant, says that "lenders and other funding sources can spot them a mile away because they all look the same. Why risk letting the funding source wonder just how much thought has really been invested in this plan, if it's obviously done on cookie-cutter software?"
Another problem with templates is that they may induce you to include information in your plan that doesn't make sense in your line of business or cause you to leave out key information. The former scenario wastes your time, and either will make you look lazy or foolish to your target audience.
Who Is Your Target Audience?
Since business plans are commonly used to seek financing, we'll assume that potential lenders and investors are the audience for your business plan. However, business plans are also often written for internal use, especially by owners and managers. (For more on winning over potential investors, read When Your Business Needs Money: Angel Investors.)
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