Imagine the following. Two friends of yours are thinking about opening a seafood restaurant. After doing some preliminary analysis, they decide to write a business plan. They spend the next two months meeting five nights a week to hash out every detail of the business. They study the restaurant industry intently, identify their target market, develop a marketing plan, settle on a hiring schedule, plan their facility, determine what their startup expenses will be, and put together three years of pro forma (projected) financial statements. After 40 meetings and several drafts, they produce a 30-page business plan that explains every aspect of the business. They ask you to proofread it, and as you read through the plan, you learn about current trends in the restaurant industry, how your friends’ business will take advantage of the trends, what the business will look like, how it will differentiate itself from its competitors, how much it will cost to get started, and much more.

Impressed? You have reason to be. There is convincing evidence that writing a business plan contributes to start-up success.^[1] It forces the founders of a business to systematically think through every aspect of their business and develop a concrete blueprint to follow. It also creates a mechanism for a business to present itself to outsiders.^[2] Most bankers and investors, for example, ask for a business plan when they are approached for funding. If you don’t have a business plan, or you have to scramble to put one together, it makes a poor impression. Planning also reduces anxiety and stress. Business owners who become overwhelmed during the start-up process rarely have a business plan in place. Starting a business can be a difficult and complicated process. A well-written business plan normally anticipates and provides solutions for handling the hardest and trickiest issues.^[3]

There is convincing evidence that writing a business plan contributes to start-up success.

Most business plans are 20 to 35 pages and are divided into sections that represent the major aspects of a new venture’s business.

A sample plan is as follows:

The title of the sections varies from plan to plan, as does the quality of the writing, the substance of the plan, and the degree to which the plan convinces the reader that the business opportunity is exciting, feasible, and within the capabilities of the people launching the business. Writing a business plan that includes all these elements is not an easy task, but it is a fulfilling and useful one. Think back to the vignette that opened this chapter. Although the two individuals sacrificed 40 evenings to write their plan, just think how much they learned through the process and how much more confident and self-assured they’ll be when they launch their business. They’ll also have a blueprint to follow and will have a plan available to provide to bankers or investors if needed.

One possible outcome of writing a business plan is that it may show that a particular business isn’t feasible.

Publications on how to write a business plan are available at bookstores, and Small Business Development Centers and SCORE chapters often sponsor workshops on how to write a business plan.^[4] Some businesses hire consultants or outside advisors to write their business plans. Although there’s nothing wrong with getting advice and making sure a plan looks as professional as possible, an outside person shouldn’t be the author of the plan. Besides listing facts and figures, a business plan needs to project a sense of anticipation and excitement about the possibilities surrounding a new venture, which is a task best accomplished by the creators of the business. Plus, hiring someone to write the plan denies the prospective business owners the positive benefits of the writing experience.

One possible outcome of writing a business plan is that it may show that a particular business isn’t feasible. While reaching that conclusion may be regrettable, it is better to fail on paper than in real life.