A business plan is a document created at the beginning of a new venture, whether it is an entirely new business or a new venture within an existing business. Plans created internally are generally only as formal as they have to be, based on the company politics. They may not include all of the same standard sections as a business plan for a new business, and are only as detailed as required by the firm’s managers.

A business plan is a document created at the beginning of a new venture, whether it is an entirely new business or a new venture within an existing business. Plans created internally are generally only as formal as they have to be, based on the company politics. They may not include all of the same standard sections as a business plan for a new business, and are only as detailed as required by the firm’s managers.

Most business plans are created for entirely new ventures, often by individuals who have never started a business before. In these cases, the primary purpose of the plan is to sell the idea of the business to potential funders, whether they are family members, friends, angel investors, or banks. A secondary purpose, but one that is nevertheless important, is to bring potential problems and opportunities to light for the entrepreneur. In the process of writing a plan that is presentable to potential external funders, the entrepreneur will simultaneously refine his or her strategy, better understand the market opportunity, and learn what kind of capital investment will be required.

What Funders Want to See

The only reason to present a business plan to funders is if the entrepreneur requires additional cash to launch the business. As this is the case for all but the smallest companies, the plan should be oriented around the information that funders will need to evaluate the business as an investment opportunity or loan risk. The startup costs of the business are delineated to show how the funding will be used. Projected financial statements are included to give funders an idea of the profitability and solvency of the business in the future. The plan should include an explanation of the opportunity in the market, the management team’s expertise, and the operations and marketing activities planned.

What a Business Plan Is Not

A business plan is not a place to offer a laundry list of ideas and state that the management will simply decide on the best ideas down the road. Some strategy should be set out based on whatever information the managers have gathered so far, even if it is slightly premature. Funders are interested in seeing decisiveness and the ability of the managers to choose a direction and orient their marketing and operations around it. Presenting options shows a business in need of additional management, and funders who cannot help with this will be unlikely to provide cash to such a company.