Ernst Young

…a written representation of where

a company is going,

how it will get there,

Outline for
a
and what it will look like

A proven approach for entrepreneurs only

Business Plan
once it arrives.

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©1997 Ernst &Young LLP. All rights reserved. Ernst &Young is a registered trademark.

Business plans are the preferred mode of communication between entrepreneurs and potentialinvestors. Experienced owners and managers of closely held businesses know that business plans can also be an indispensable management tool. Many have found that just completing the steps required to develop a business plan forces them to introduce discipline and a logical thought process into all of their planning activities. They have found that a properly prepared business plan can greatlyimprove their company’s ability to consistently establish and meet goals and objectives in a way that best serves the company’s owners, employees, and investors.

A business plan can take many forms, from a glossy, professionally produced document to a handwritten manuscript in a three-ring binder that serves as the documentation for the goals, objectives, strategies, and tactics of a company.

Inany form, a business plan is simply a written representation of where a company is going, how it will get there, and what it will look like once it arrives.

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Uses of a

Business Plan

A

business plan is a valuable management tool that can be utilized in a wide variety of situations.

In most companies, business plans are used at a minimum to: • Set the goals and objectives for thecompany’s performance. • Provide a basis for evaluating and controlling the company’s performance. • Communicate a company’s message to middle managers, outside directors, lenders, and potential investors. When utilized most efficiently, the same business plan, with slight modification, can be used for all three actions.

Setting Goals and Objectives
The business plan for an early-stage companyis, in many ways, a first attempt at strategic planning. An entrepreneur should use a business plan as a tool for setting the direction of a company over the next several years, and a plan should set the action steps and processes to guide the company through this period. Many entrepreneurs say that the pressures of the day-to-day management of a company leave them little time for planning, andthis is unfortunate because, without it, an owner runs the risks of proceeding blindly through the rapidly changing business environment. Of course, writing a business plan is not a guarantee that problems will not arise. But, with a thoroughly thought-out plan, a business owner can better anticipate a crisis situation and deal with it up front. Further, a well-constructed plan can help avoid certainproblems altogether. All in all, business planning is probably more important to the survival of a small and growing company than a larger, more mature one.

Performance Benchmarks
A business plan can also be used to develop and document milestones along your business’s path to success. In the heat of daily operations, you may find that taking an objective look at the performance of yourbusiness is difficult. Often, the trees encountered daily obscure your view of the forest in which your company operates. A business plan can provide you and your management team with an objective basis for determining if the business is on track to meet the goals and objectives you have set.

Internal and External Communications
Your company’s story must be told and retold many times to prospectiveinvestors, potential and new employees, outside advisors, and potential customers. And the most important part of the story is the part about the future, the part featured in a business plan. Your business plan should show how all the pieces of your company fit together to create a vibrant organization capable of meeting its goals and objectives. It must be able to communicate your company’s...