If you are just starting a company and looking for funding, or looking for additional funding for growth, you will need to develop a traditional business plan. Creating a business plan is a business hurdle that entrepreneurs seem to dread. Do you do it yourself? Do you hire someone to do it? How do you get it done quickly, but without spending too much money on it? Will what you do yourself be adequate to get funding?

In this article I will discuss the pros and cons of do-it-yourself business planning versus having a business planning consultant do it for you or with you.

The Do It Yourself Business Plan

Particularly if you are seeking capital of less than $200,000, consider creating the plan yourself after taking a class or reading some books or getting some coaching for someone who has written successful business plans.

Consider taking a three-hour business planning class through SCORE or the local Small Business Development Center. Even if you decide afterwards not to write your own plan, you will have a much better idea of what you want out of the process and what to expect.

There are some good reasons for an entrepreneur to do the business plan:

• First of all, because you can. If you’ve read sample business plans and find their accounting jargon intimidating, you are not alone. But as long as you can clearly get your message across and have other people such as you accountant look at the plan before it goes to lenders or others, you can do this work yourself.
• It is in learning the business planning process that you develop analytical thinking skills necessary to run your business with an intimate understanding of your own business model. Going through the planning process is an invaluable business experience.
• You need to know the plan inside and out and really understand the variables involved. You are the one who will be asked the tough questions by potential investors or lenders, such as “What will you do if only half your expected revenue comes in?” or “What will you do if you find out that direct mail is not working for you as your primary marketing tool?”

Outsourcing the Business Plan Process

Entrepreneurs are fire fighters. One of the most important jobs of an entrepreneur is to manage time, and do those things that you are best skilled to do. Many entrepreneurs decide to hire someone else to do their business plans, often because they have an urgent need for the funding and can’t afford the learning curve to be able to develop a high-quality plan that will meet the needs of lenders or investors.

In addition, if your funding requirements are more than $500,000 my recommendation is to get some professional help with this project, even if you do some of it yourself.

Some reasons to consider hiring a consultant:

• It will get done! Business planning is done much faster with someone who knows the process. Every entrepreneur has good intentions about getting plans completed, but months later they still haven’t done all the work. Planning should be high priority work, but it is hard to get to when customer calls and employee problems require immediate attention. The sooner the plan is completed, the sooner funding can be attained. And the price of hiring the consultant will be small in comparison with the increases in growth and profitability of the business.
• It will get done in a way financial professionals will respect. Business planning is done better by someone who knows how finance people look at plans and what they will and won’t question. Once you’ve been through the business plan process many times, you know what it takes to get funding – what to emphasize and what to play down.
• The consultant’s objectivity will allow for non-emotionally-based projections and expectations for the business. A consultant will be much more objective in the process and question your assumptions, making it less likely that the business will have problems after the funding comes in.

No matter what, don’t let a business planning consultant talk you into putting any information into your plan that you aren’t comfortable with. If it doesn’t look right to you, it probably isn’t. It is your business, and you will be stuck with the plan long after you’ve paid the consultant’s bill. Make sure it is the plan that you want, one that matches your goals and objectives, and captures the way you look at business and the spirit of your company.

If you do decide to hire a business planning consultant, here are some of the important questions to ask to make sure you get the greatest value from your investment:

1. How many business plans have you written for my type of business? How many of them were funded?
2. How much time will you need of mine during the planning process?
3. When will the plan be completed, and how many drafts should I expect to see and have the opportunity to comment on?
4. Will you be writing the plan yourself or do you have associates who do the work with you?
5. Will there be an opportunity for you to present the plan or for me to present the plan to my other advisors before the final draft is done?
6. How do you work in collaboration with my partners and advisors so their input is taken into consideration during the writing of the plan?
7. Do you do the market research and the financial spreadsheets, or are those things done separately (and charged for separately)?
8. Does your price include revisions or customization for certain types of funding (to include different information needed by investors versus lenders)?
9. Does your price include coaching to prepare me to talk with lenders or make financing presentations?
10. Will I have an electronic version as well as a hard copy version of the final plan (so I can make changes later if I need to)?

The Optimum Solution: A Blended Approach

At best, the planning process should not be at either end of the spectrum, but squarely in the middle. In my experience, plans that win funding come from a true collaboration between a skilled consultant/facilitator and the entrepreneur’s team of employees and advisors.

A business planning consultant can act as a coach, first assessing the job to be done, and then recommending who is best to do it. The business plan should be a compilation of work between the vision and goals of the entrepreneur, the technical understanding and expertise of his or her accountant and other professionals, a consensus of employees or others, and the research and writing abilities of the business planning consultant. The consultant should meet with all parties involved, talk about what is needed for the plan, and use all the resources available to get the work done as quickly and cost effectively as possible. It is the consultant’s responsibility in the process to take all the pieces and make the final plan into a readable, accessible document that will stand up to investor/lender scrutiny.

My final caveats:

• Don’t pay more than a few thousand dollars for a plan unless you are looking for capital of well over $1 million. I have heard more than a few horror stories by people who have hired university professors assuming they are the experts (they aren’t) and paying tens of thousand of dollars for a poorly written or incomplete plan. Ask your banker for business planning consultant recommendations, or better yet, talk with someone who had a good experience having a business plan written for them. It is reasonable for a consultant to expect you to pay half of the fee up front and the other half at the completion of the plan. And you can’t hold the consultant responsible if you don’t get funding based on the plan – too much is based on your own credit and management skills.
• Don’t expect to get a finished plan that is a roadmap of everything you need to do to have a successful business. That isn’t the purpose of the business planning process. A traditional business plan is intended only to document your strategies for the business very briefly – but well enough to get funding. If you are hoping for something that will tell you how to market or how many people you need to hire, you will have to start with a deep strategic planning process, and probably buy lots of consulting time to get you going.
• Don’t expect a great a business plan from a poor business model. If your costs are too high to make your business profitable, the business planning process will help you discover that. Then it will be up to you to make the hard decisions about changing your costs structure to make the business work. The business planning consultant is a skilled professional, not a miracle worker. A good business plan can help you highlight your strengths and minimize your weaknesses, but it cannot make an unworkable business model into a thriving business.

And one final thought: Don’t go on to start a business or make changes in your current business if everything in the business planning process tells you it won’t work. Things don’t get better out in the real world if they don’t work on paper. Deal with the weaknesses – get more training, consider product redevelopment, or have a home-based business to reduce costs until you can sustain the rent for an office. Businesses fail finally because they’ve run out of money. If your plan tells you that you can’t make enough money to make the business work for the long run, pay attention to that reality.

The idea of writing a business plan seems daunting to many. In reality, if you start with a solid framework, or outline, you will find that it goes much faster than you thought possible. Better still, you will learn a lot about your own business as you go through the process. This article focuses on common mistakes to avoid. By avoiding these common pitfalls, you will create a better business plan that helps your business to succeed and one that resonates with bankers and investors.

Mistake #1: Trying to write the business plan with just an idea.

Bam! You have an idea. In fact, you have a great idea. It is to your credit that you want to put your thoughts to paper and create a business plan. Yet, you will improve your idea and ultimately your business plan, if you let your idea incubate. In this fast-forward age, some things are still better developed over time. Think of your business plan not as microwaveable meal. Rather, as a stew with many ingredients. Each one must be added in its own time. Sample the stew and see what to add next. All along you had the recipe, but you must let it come together over time. In the end you will know when it is ready to be served.

Remember that it is a ‘business plan’, not an ‘idea plan.’ Your plan needs to reflect that you have thought through all of the aspects of turning your idea into a business. Yes, get to it early, but not before you have thought through all the critical factors.

Mistake #2: Outsourcing the writing of your plan without learning anything in the process.

There are plenty of services that will write your business plan for you, for a fee. In fact, you can even buy a pre-written plan for any type of business. There is nothing wrong with getting help. Keep in mind that in the end, you have to execute the plan. If your plan is to serve any purpose you must truly understand it. Reading a document that was written by someone else won’t qualify as truly understanding the plan. In a business plan, there are inputs and outputs, causes and effects, actions and outcomes. It’s important that you understand these relationships.

Get the help you need, but also take the opportunity to learn what you didn’t know before. For example, let’s say that you needed to go to an outside source for help with the financial projections. When they are complete, have your service provider walk you through every aspect of the financial statements so that you would be able to explain them to someone else with confidence.

Mistake #3: Claiming you have no competition.

There is big trouble ahead when a business plan includes the words, “We have no competition.” To a banker, investor, or experienced business person this translates to, “I have no idea who my competition is.” It is very important for you to understand who your true competitors will be. Your true competitors are those organizations where your future customers are spending their money today-money they will instead be spending with you in the future. That might or might not be a business just like yours. For example, the motorcycle shop’s biggest competitor might be the boat dealer.

In addition to your direct competitors, be sure that your plan addresses all of those organizations that will be competing for the same dollars you will be going after.

Mistake #4: Outrageous financial projections.

It’s impossible to know if your financial projections will prove to be accurate. Yet, it’s fairly easy to tell if they are realistic. Understand that your financial projections are more of a reality check than anything else. Accordingly, make sure they are within reason. More than one wide-eyed entrepreneur has thought they had the next Google on their hands. Even if they were right, the more likely reaction to seeing a sky-high revenue forecast would be a total loss of credibility.

The source of most unrealistic financial projections is the “top down” forecast. A top down forecast sounds something like this: “There are $1 billion of widgets purchased online every year. If we get just 2%, we’ll have a $20,000,000 business.” These forecasts rarely go on to say how the business will get to 2% market share.

Instead, take the bottom up approach. Show the number of sales that can be made by each sales person (or per site visitor), and build it up. Then make sure your plan accounts for all of the right resources that will be required to generate and deliver the sales figures. The reality of your forecasts will start to come into focus much more quickly with a bottom up approach.

Mistake #5: Not having the right team in mind.

Finally, keep in mind that new businesses are nothing more than the wisdom of the people behind them. They have no current customers, contracts, or sales backlog. The new business is totally dependent on the team. Collectively the team should be fully experienced in all aspects of the industry and markets your business will serve. Yet, when you are at the business plan stage, it is unlikely that you will be in a position to hire your full team. There are two steps you can take early on that will provide fuel for your business and your business plan.

First, map out the key positions for which you intend to hire. Clarify their roles and the qualifications. Prioritize your list of early hires, recognizing that sometimes things fall into place due to timing. If possible, identify specific individuals who are enthusiastic about joining your company when you have funding or reach a certain milestone. With their permission, incorporate their information into your business plan.

Next, work to assemble a board of advisors who have relevant experience. Advisory board members, depending on the formality of the arrangement, often work at no cost in the early stage of the company. Identify individuals who could provide mentoring in specific areas. Again, with their permission, list these advisors in the team section of your business plan.

Going Forward

A business plan is a working document that will help you to refine your vision and execute a successful plan. Adhering to the discipline required to write a solid plan will propel your business forward. Start with a solid business plan outline or business plan template. As it is said, nobody plans to fail, but too many fail to plan. Be sure you “plan” to succeed.

A business plan is a primary way for any entrepreneur to take, regardless of the business size. Preparing a better business plan should be one of the most important things an entrepreneur can do. The other reason for owning a business plan is that it could help you if you are intending to get funds for your business from an outside source. Below are some elements you may include in your plan:

Financial – You need both operational and startup money to start a new business and you have no trust of obtaining any capital from opened financial institutions such as banks without a well developed business plan. The affordable one will define your concept, make clear of your potential, identify your financial requirements and detail your financial performance. If you intend to obtain finance from venture funder, your plan will must present strong financial data and market research in a professional, polished package in chronological order. A sound Financial Plan have to include a projected balance sheets, income statements and cash flow statements.

Management – A business plan is a handy tool with three elemental purposes: communication, management, and planning. As a managerial tool, it will helps you track, control, and assess your progress. A plan can act as a management tool that could help to focus on where you are and where you want to go in the future. The management section should include the names and backgrounds of the leading members of the management team and their respective responsibilities.

Market – Market analysis and sales description of the market for your products and services, explanation of competitive they will be, and a concrete discussion of your upmost marketing efforts to generate sales. From there, you could continue to explain how you plan to meet the needs of the market. A much detailed description of your market for the products and services, as well as the competition comparisons, should be provided also.

Product – If you have products to push the sales, you need to contain information about the manufacture of the products. If a new product is being proposed and time permits, a presentation of the product might also be included. The products and services, marketing and business operations should all closely connect in with business strategy.

Marketing – Marketing is an every day effort. It is about to educate people about you, what you do, and how you could solve their niche problems. You also need to contain how much you intend to spend on marketing. Exactly like a business plan, you should also have a strategy and detailed plan for your marketing. A key factor within it is the marketing plan, which shows marketing strategies that will be used to advertise and promote the products and or services.

Summary – The executive summary should be an overview of the business plan. Executive summary is normally one page summary of the import and key points in your plan. The content of the presentation is normally limited to the executive summary and a few import and key graphs showing financial trends and key decision making benchmarks. The executive summary introduces your business strategy and perhaps is the most important and key section for your money lending institutions. An executive summary is outlining goals and objectives. This should include a summary of your financial forecasts, with spreadsheets showing the formula you used to reach your projections. This summary is also important as a communication tool for employees and potential customers who need to understand and get behind your ideas.

In short, writing a plan for your business is the best way to exam if an idea for starting a business is feasible, other than do it directly. A well business plan is one of the important and key factors to secure your capital needs. Writing a plan is one of the most important aspects of starting a business in this age’s environment. That is right, the exercise of preparing a plan is very important in helping you obtain an understanding of how your business will operate in the competitive marketplace.