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  • Each year, about 600,000 businesses are started in the United States. One of the first steps to starting a successful business is a good business plan. Robert Krummer Jr., chairman of the First Business Bank in Los Angeles, once said, "A business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble."

    Function

    According to "Entrepreneur Magazine," some of the main questions that should be considered when creating a business plan include how the customers will be reached, where the financial resources for the business will come from, and the demographics the business plans to target. The business plan is considered the blueprint of the business.

    Significance

    The Small Business Association defines a business plan as something that identifies the person's goals and defines the business. With a business plan, the core of how an entrepreneur wants to operate and conduct business is established.

    Finances

    Business plans are also essential to ensuring that a company maintains its financial integrity. Some of the basic components of the business plan include a balance sheet, income statement and a cash flow analysis. With a good business plan, a person can handle any unperceived financial obstacles and allocate their resources properly.

    Venture Capital

    A business plan can also be used as a resume for the company. For example, many companies use their business plan in order to gain venture capital. Most venture capitalists invest in businesses that have high potential and are in their early stages.

    Considerations

    Entrepreneurs can write their business plans themselves or hire a consultant to help them. There are also software programs and packages that can assist an individual with the formatting process for a business plan. However, most of these packages cost money.

    Source:

    Small Business Administration: Business Plan Basics

    Entrepreneur Magazine: Plan Your Plan

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