Introduction

Often when creating a new company, or progressing an established company on to its next stage of development, having a robust business plan is generally low on the list of priorities. Ensuring the basics such as premises, orders, product and cash flow are often more important to the entrepreneur. You know what you are doing, don't you, so creation of a business plan is not that urgent? This opinion could be dangerous.

With the explosive growth that has been seen with the internet and "new economy" in recent times, there has been an increase in tales of multi-million funding offered on the strength of an individual's idea and little else. No one doubts that some of these stories may be true but, for the most part, to gain commitment from investors, suppliers, customers and other 'stakeholders' a business requires detailed planning and preparation. Most venture capitalists require a researched and persuasive business plan before they will even let you in through the door.

It is important to think of a business plan not just as a document necessary for external parties interested in the business, but equally vital for internal stakeholders, such as the board of directors, in ensuring that that they are united in the planning, control and ultimate aims of the organization. It can also help ensure that key elements in organizational growth are not omitted. It is unrealistic to expect entrepreneurs to excel in all aspect of operations. Some may be sales orientated, whilst others more comfortable in finance and administration. A comprehensive business plan can assist by highlighting potential weaknesses and questions that need answering now, rather than having them delayed until it is too late.

Business Plan Objectives

Much emphasis is often put on the structure of a business plan; snappy executive summary followed by mission, description of the business etc. Whilst presentation is important, no amount of "fluff" will disguise an ill-researched plan from a venture capitalist. They have seen it all before. A good business plan should aim to achieve at least the following

· Identify the objectives of the business
· Develop strategies to meet these objectives
· Identify potential problems and their solutions
· Define the structure of the business
· Define the future cashflow and profitability expectations
· Help in obtaining the required external funding

Just as the market in which the business operates changes, so too should the business plan. Do not view the plan as a static document, but rather aim to review it as often as possible (especially if you are working in a fast moving environment). By consistently referring back to the business plan, you can monitor how you are progressing against your original goals and look to take action if it appears they are being missed.
Possible Pitfalls

So what could happen if you do not produce a plan? Of course, you may manage just fine, or you could find yourself beset by one or more of the mistakes below:

· Lack of direction leading to sub-optimal decision making
· Inability of management to reach decisions and act on them
· Insufficient control of product costs
· Lack of understanding of working capital requirements
· High staff turnover and dissatisfaction
· Insufficient product quality control
· Inability to cope with market trends and competition
· Inadequate financial records

Conclusion

When looking for external financing, a business plan is generally a prerequisite for obtaining external funding. Do not just view it, however, as a necessary evil, but rather as an internal planning document that may be able to assist you in avoiding the common pitfalls experienced by new and expanding businesses

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