A business plan is like a road map for your new business - it contains directions and other important information to get you from your destination of having no sales to breaking even or making a profit. Starting a business without this plan is like taking a mountain hike without a map or any tools and can ultimately lead in a disastrous ending!

Having a business plan allows you to plan out each section of your business including the business finances. The plan should show you how many sales you need to make in order to break even or make a profit - this then allows you to check to see if you are meeting those targets and if you aren't you can correct it before it is too late and you make a loss for that year. You can also plan out a monthly budget to allocate to stationary, equipment, marketing or any other expenses that you may incur - this allows you to stick to a budget and not spend more than you need to; it also helps you to keep track of your finances and any payments that you may have otherwise forgotten.

Many people don't feel the need to write a business plan, and the select few that do write it and then never look at it after the first few months (if that!), but a business plan should be reviewed and updated regularly to ensure that your business targets are being met and that you are on target to make the estimated sales figures. Regularly updating your plan means that you can organise new marketing or sales schemes and see how effective they truly are.

There are many other elements to the business plan which include the SWOT Analysis - this allows you to analysis your Strengths, Weaknesses, Opportunities and Threats. By doing this you can work out where you are more likely to succeed but also work on strengthen your weak areas. Looking at potential opportunities allows you to see where you might be able to make more sales, whilst analysing possible threats allows you to find ways to counter them and possibly turn them into positives.

The plan will also give you a helping hand when it comes down to setting a price for your products or services. By working out how much money you need to break even you can then work out how many sales you would need to make at a certain price - if the number of sales is a very ambitious number that you feel would be unachievable then you should consider setting the price a little higher to drop the amount of sales needed.

The main advantage to following a business plan is that you are always one step ahead and should always know what your next goal or strategy is. This could be starting a new marketing scheme which has been scheduled for a specific date, reaching two hundred sales, or many other milestones - by using the plan you can organise ways which will help boost sales or prevent problems from arising.

Treat your plan like it is your business bible - it holds a lot of information about your business and will help you reach your goals, but only if you update it regularly and provide new information and targets. A business plan won't update itself and it is no good if it is outdated. Take care of your business plan and in turn that will help you take care of your business!

Learn more about this author, Natalie M. Wolverson.
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