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The Right Way to Write a Business Plan

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The Right Way to Write a Business Plan

The right way to write a business plan starts with an understanding of the different types of business plans. We provide some excellent business planning advice in this article.

The business plan is perhaps the most important tool that a startup business possesses in order to obtain funding from venture capital and private equity groups.

When it comes to the initial writing of a business plan, there are many different formats in which a plan can be written that vary widely with the intended application.

The extent of detail and actual length of the plan can be tailored to the desired accomplishments of the plan and the complexity of the company's operations.

For a company still in the early stages of development, without an extensive history of operational performance, a summary business plan may be the right choice.

Summary Business Plans

A summary business plan is generally about 10 - 15 pages in length. In addition to newly developing businesses, the summary plan may also be a practical choice for some more established entities. A summary plan is a less cost and labor intensive alternative to a full business plan, and can prove useful for companies making their initial foray into the investment waters.

A summary plan may also be a good choice for an entrepreneur with a proven track record of success, as potential investors may not require as much detail in the earlier stages as they would from a less experienced manager.

Summary plans should include enough information to show potential investors that you have a firm grasp on the market conditions and potential for risk and reward in an abbreviated form.

Full Business Plans

A full business plan is a more traditional form and typically ranges between 20 - 40 pages. The full business plan is normally used for financing purposes and goes into a great amount of detail pertaining to a company's projections and operations.

As the amount of requested financing increases, it is a fair assumption that this highly-detailed type of plan becomes increasingly more desirable. Full business plans aim to provide a 360 degree view of a business, including such elements as market analysis, detailed research and development information, sales and cost forecasts, as well as financial data to support all assumptions and forecasts.

Operational Business Plans

The most detailed type of business plan is what is known as an operational plan, typically ranging from 40 to upwards of 100 pages. It is necessary to provide such a tremendous amount of detail, as the operation plan is designed to serve as a broadly-focused blueprint for company operations.

The operation plan is meant to ensure that all managers understand the short and long term direction of the company and the role they will play in helping the company achieve its goals.

How to Approach Writing a Business Plan

Regardless of the type of plan to be written, management must decide whether to delegate the responsibility of writing portions of the business plan to the head of each department or to have the chief executive undertake the task of writing a full draft of the report, then distributing the draft to top management for revisions and input.

It is important that those insiders most intimately acquainted with the business and who have a vested interest in how well the business does write the plan rather than outsiders. Potential investors will almost certainly be more interested in management's take on the future direction of the company rather than an outsider's possibly biased perception.