What is a Business Plan?

Many people will say the definition of a business plan is a "document written to raise financing for a new or existing business." Not so. Here are some better definitions:

A business plan should clearly explain the what, why, when, who and how of a project or business. From Wikipedia: A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. And finally, it is a written document that details a proposed or existing venture. It will typically explain the vision, current status, expected needs, defined markets, and projected results of the business. As you can see by these definitions it has nothing to do with attaining money.

A business plan alone has never raised a single dime for anyone except during the failed Dot Com era. During their heyday, dot-com's would create a business plan, sometimes only written on a napkin or scrap of paper, in order to raise millions with the sole intention to sell the company a short time later never making a dime from their idea the way traditional businesses would. Not anymore though.

There is one thing that all business plan's are intended to accomplish, that is to get you into the door talking to an private investor or banker. They may get you nothing more than a conversation with a venture capitalist. That is all. A conversation, but no money. The money only comes after you have done all of your homework, crossed all your “T's” and dotted your “I's” properly.

Never underestimate the power of a conversation though, that would be to your failure. Do you know how many thousands of people never get so much as a conversation? Let's just say there are a lot of them.

It all starts with a good business plan.

A business plan includes presenting sufficient material, information and research to the lender to allow them to analyze the potential of your business idea. They look at how likely they are to get their money back? That is all they really care about.

In the case of an SBA lender they will take what you present them and tear it apart, literally. They run it through all kinds of financial analysis. They check your credit history. They will compare your business idea to every business already in your industry. Only when they are satisfied with their analysis will they even consider approving your business plan for financing.

Perhaps a better definition of a business plan is "a document which begins the lending or investing process". If it is not a good business plan, it will end the process and you have to start again, but if it is a good business plan, it can open doors putting you on the road toward owning a business of your own. And, that's what a business plan is all about, putting your business off to a good start.

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