A business plan is your “business story”—a story that you will tell to a wide variety of people, from personal friends and casual acquaintances to potential partners, suppliers, customers, and investors. There are three purposes to writing a business plan: development, management, and communication.

• Development. Writing down your business plan solidifies and defines your intentions. It forces you to think through many aspects of a business that might otherwise be overlooked, identify roadblocks and obstacles, and determine ways to resolve or avoid them. Business plans can be used to get the entire management team and perhaps the employees of the company to understand where the company is and where it is heading.

• Management. Of course, the goal of most businesses is to make money, so a business plan should summarize how a business opportunity will translate into profits. A business plan also helps in the management of a company. Because it is a living document, it should be modified as the business changes and reaches certain milestones. It can be used to track and monitor the progress of the company as well as evaluate projections with respect to the actual performance.

• Communication. A business plan is often used to attract investors or obtain loans. It can also be used to attract strategic business partners, additions to the management team, or high-quality employees. As such, the plan needs to communicate that you have taken an objective and realistic view of your company and thought through all the potential problems and determined reasonable alternatives.

Although some business plans are lengthy, formal documents that can take weeks or months to prepare, others are short, informal outlines. Regardless of when or how it is written, a business plan is a crucial part of a successful business operation.