Is a Business Plan Really Necessary

A business plan is a written summary that clearly explains your business idea, sales projections, business strategy, market data, and overall goal. Having a written business plan is an important component to  starting, developing, and growing your business. 

A business plan will serve as a guide for you, hopefully preventing you from making common, yet costly, mistakes. It will also help you plan, budget, and set goals for your business, and will help determine the profitability of your business and how likely you are to succeed. If you choose to acquire funding through investors, they will certainly ask to see your business plan to confirm they are making a wise investment.  But even if you do not need an investor,  a business plan will help steer your company in the right ways.  

A good business plan requires thorough market research and knowledge of your competitors. You will see that writing a business plan is a  lot of work and effort, but it is certainly worth time, as research shows that entrepreneurs who write a business plan are 2.5 times (or 250%) more likely to start their business.

There are several different types of business plans, and you need to choose the right one for your business. But regardless of the format you choose, the process of thinking critically and thoroughly about your business plan prior to starting, will certainly contribute to your overall success as an entrepreneur. 

Here are the two main types of business plans to consider…

#1: Traditional Business Plan

A Traditional business plan is anywhere from 20-100 pages long. The traditional plan includes details such as defined target market information, competitor analysis, market share opportunity, financial requirements, sales projections, and detailed marketing strategy. The data is typically broken down into six different categories, following a specific order format. A traditional business plan allows you to clearly explain the details of your business for potential investors.  Investing  the time into a traditional business plan is  beneficial because it covers every aspect of your business. And because not everyone will want to read through a traditional business plan, it is helpful to have this document ready and handy so you can shorten it or easily referenced it as needed. 

#2: Short Business Plan

If your business is smaller and simpler, a  traditional business plan may feel like overkill. If this is your situation, you should consider a short business plan. A short business plan is helpful because it can provide a clear, concise summary of your business idea. Another benefit to a short business plan is that they are easier to distribute, download, and reformat for various needs, such as a slide show presentation or to email to potential investors. There are two types of short business plans: 

1. One-Page Plan: This summarizes the big picture of your business in one page that you can use as an “elevator pitch”. 
2. Lean Business Plan: Typically three pages in length, and includes an executive summary with short supporting statements. 

Short business plans are a great tool to use when interacting with investors, networking with potential stakeholders, and wanting feedback from mentors who do not necessarily need all the details covered in the traditional business plan. These shorter plans can clearly describe the problem your business solves, your advantage over competitors, and the data you need to know in order to start and grow your business. 

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