by Steve Holder

Created on: May 22, 2008   Last Updated: May 29, 2008

Whether you're planning to start a business or have your own business already underway, you have only two reasons to write a business plan:

To develop a road map in your mind for succeeding in your business (an internal business plan)
To demonstrate to someone else you have a roadmap for success (an external business plan)

The Internal Business Plan

A business plan you create for yourself doesn't need to be a formal document. You can literally create it on a napkin. Many successful entrepreneurs have.

The point in creating an internal business plan is to spend the time thinking about the future of your business, and identifying the challenges that are going to arise and how you're going to deal with them.

A great way to start is to simply write down everything you can think of concerning:

What you're selling
Who you're selling it to
What your customers want
What your customers will pay
How you will produce or deliver the goods or services
How much your operations will cost
How you can finance your operations until income meets expenses
How you obtain your customers
How you collect from them
How long it will take before your income meets your expenses
Some calculations to back up your projections

When asked these questions, many budding entrepreneurs say, "I have that all in my head." The experienced entrepreneurs tell them, "I did, too. But in writing it down, I figured out where I was wrong."

With so much to think about, writing it all down can seem overwhelming. But since no one else has to read it, it doesn't have to be pretty. Just sit down and start writing. You'll find the exercise incredibly enlightening.

The External Business Plan

The external business plan is a formal document you prepare for someone else who needs to know that you have a plan to succeed. The "someone else" is usually someone who's going to invest in your business such as a prospective partner, banker, or investor. When money is at stake, these people want to know that you have a plan, and that your plan makes sense to them. That requires a well-written and well-organized formal business plan.

The length and detail of a formal business plan will generally depend on the size of the loan or investment. Ten to twenty pages of pithy information could adequately support a request for up to $25,000. In the $100,000 plus range, it may take 40 to 50 pages of detail to make your investor or lender feel comfortable.

Don't let the thought of a formal, written business plan intimidate you, though. If you're able to write your thoughts down for yourself in any format whatsoever, a competent business plan writer can turn your thoughts and ideas into a brilliant looking document. To get the help you need, begin by referring to your local SCORE office (Service Corps of Retired Executives) for free, confidential advice. (Score.org.)

If you'd prefer to create your own formal business plan, simply search for "business plans" in your favorite Internet search engine. You will find a wealth of information on the expected format, and business plan examples you can use.

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