Is a formal business plan necessary?

Much has been written about the necessity (or not) of writing a business plan.  I will always advocate taking the time to develop a plan before you dive into any new business or opportunity and then on an ongoing basis (usually annually) as long as you continue the business.  I advocate this simply because you will have a greater chance of success if you think through the who, what, when, where and how of your business before you embark on it. This turns "the unexpected" into "the anticipated and prepared for".

Do you really need a bound, footnoted, discertation with charts and graphs to accomplish this?  Most of the time, you probably don't.  Your audience will dictate the formality or lack there of, of your final plan.

1. If you need traditional funding, then you will definitely need a formal well written plan to submit with your SBA loan application.  It should be professionally bound and follow the formal business plan format - table of contents, executive summary, business section, financial section and appendices or supporting documents.  The bank's biggest concern is how and when will you be able to pay them back?
2. If you are going after venture capital, you will also need a well documented plan, but you have more leeway in the presentation, content and format.  You will always need a thorough and detailed financial plan if you are seeking funding, but one of the things I really stress for venture capital is creating and building excitement around your idea and business.  The VC's biggest concern is what are the excepted returns for this business? The bigger the better!
3. If it's just for you and your management team, you have even more leeway.  It just needs to fit into your company style and culture, but it does need to be documented, used and revised on an ongoing basis.  Whatever format best achieves your biggest concern which should be success!

 But that just focuses on the presentation of the plan and quite frankly, that is not the real purpose of doing a business plan.  As with most things in life, it's not the end result that is the most important thing, but the process in getting there.   More on that in the upcoming weeks!