Writing a business plan is an essential part of any startup journey. While it can be a pretty time-consuming process, it is not something that should be skipped. The majority of businesses fail, often as a result of running out of money, something a business plan can help preempt.  Effective business planning helps businesses across many aspects of their business operation, not least as an early warning system. As part of the business plan, the entrepreneur needs to forecast revenues and costs (broken down on a monthly basis). As monthly data emerges, the business plan can thus be used as a means to assess whether or not you are on track. If not, remedial action can be undertaken before it is too late.

Writing a great business plan is not something entrepreneurs do everyday, and hence is a skill most entrepreneurs have not mastered (particularly when it comes to financial projections). A business plan also forces the writer to produce evidence (across a breadth of areas) that they have a viable business opportunity.  There are three main ways to write a business plan:

1. Pay someone to write it.
2. Write it yourself using Microsoft Word and Excel.
3. Write it using a task-specific software product, such as Business Plan Pro (disclosure: Palo Alto Software makes this product).

If you, like many entrepreneurs, are time rich and cash poor, it is simply too expensive to outsource and hence you need to “go it alone”. When it comes to using Word and Excel there are undoubted benefits – not least the fact that they are “free” in the sense that they are bundled on most computers. The interface is also familiar, given the popularity of their use. However, while these tools are excellent when you know exactly what you need to produce, they offer negligible assistance when it comes to producing specific content, such as that required for a business plan. If the purpose of the business plan were simply to jot down a few notes to keep you on track, they would suffice. However, if you intend to circulate the plan to peers, colleagues or prospective investors, you will need to produce a plan worthy of your name. This is where products like Business Plan Pro help as they save you time and provide the structure so you can focus exclusively on the content.

Given that you are essentially trying to create a plausible narrative about your company’s future prospects, you need to make many educated guesses. The assumptions you make when crafting your plan will help the reader assess whether the opportunity is credible or not. Hence the more you can rely on factual data the better. If you can obtain data relating to competitive offerings, this data will act as a useful reference point for your plan (as well as a sanity check!). It is also important to undertake market research so your business plan reflects the fact that you have identified a need, created a solution and have then obtained independent verification that your solution is one that people will pay for.

In summary, a business plan is an essential element of the startup journey. While tempting to write from the comfort of your desk, it really needs a heavy bias of data obtained from customers, prospects and your primary market research. Finally, it is important to realize a business plan is never finished. It needs to evolve so that, as more information emerges and circumstances change, your plan can reflect these changes.