Why is a business plan necessary?

Gray Poehler

By: Gray Poehler | Times-Dispatch
Published: March 28, 2011

Q: Must one have a business plan to start a business, or is it just for business loans? Also, is it required in any other capacity?

A: Think about the term "Business Plan."

In its simplest form, the plan is your vision for your business.

Surely you have given much thought to what you want to do and the goods or services you intend to offer.

However, it is not enough to have a great idea if you do not know how to organize and market the business.

Decisions need to be made regarding the legal form under which the business will operate.

Will you incorporate your business or form a limited liability company?

Will you operate out of your home or rent office space? Will you employ others or use independent contractors, and do you know the tax implications involving the two?

Then there is the question of record keeping.

Will you outsource the bookkeeping or do it yourself? What kind of insurance will you need to protect the business and yourself? And how about the reporting of federal, state and local sales taxes; not to mention the various business licenses that may be required?

If all this has your head spinning, don't fret.

A well devised business plan will walk you through the start-up decisions and then help you map out the future direction of your company.

The business plan also is required by most lenders and those seeking guarantees from the Small Business Administration.

The SBA has a website that offers advice on how to start a business and what is required in order to be considered for a loan. See http://tinyurl.com/65273d8.

You should complete a business plan before you invest the first dollar.

A well-thought-out plan will give you the information you need to assess the viability of your venture.

Caution: You should have some start-up cash savings, generally 25 percent of the total amount required, to carry the business for the first year.

SCORE offers a free business plan outline for both start-up and existing businesses at www.score.org/template_gallery.html.

The site also offers several financial spreadsheets in Excel format to assist you in developing start-up expenses, 12-month cash flow projections and an analysis of when you can expect to break even.

The business plan is your roadmap to success. Take the time to do the due diligence.

Gray Poehler is a volunteer with the Richmond Chapter of SCORE, Counselors to America's Small Business. To ask a question, go to wwww.richmondscore.org and click on "Ask SCORE." A counselor will respond. Select questions and answers will be featured in Metro Business.