Quick: What do you think of when you hear the term “business plan?” If you’re like many small business people, your imagination immediately serves up a picture of a thick binder full of spreadsheets and analysis, essential for raising startup money and not much more, followed of course by a consultant’s huge bill.

If so, it’s time to rethink what a business plan is, what it can do for you—and how much it has to cost. Many experts compare a business plan to a roadmap that directs day-to-day progress, keeps your eye on targets and benchmarks, helps you anticipate obstacles and recognize opportunities, and gets you to your long-term goals. Your plan can also give advance warning when cash flow is weak and help to raise more money if needed. And it doesn’t have to be a budget-buster, either.

The plan Matthew Johnson and Randall Elkin wrote together is a big factor in the success of their three-year-old business, Energy Fitness and Gymnastics in Newton, Mass., which offers gymnastics programs for children and personal training for adults. “Our plan drives everything we do. It gives us our marching orders on a daily basis.” says Elkin. “It also helps us maintain clarity of vision and concept, and keeps us on track.”

If you’ve never done a business plan, don’t worry: You have lots of company. Rosalind Resnick and her partner didn’t have one when they launched their Internet-based company, NetCreations, in 1995. “We were winging it,” she says. “Our focus was simply on survival.” NetCreations was five years old by the time Resnick wrote its first plan, with the help of the company’s CFO, in preparation for an IPO. That process turned Resnick into a true believer. She now owns Axxess Business Consulting, based in New York City, which helps clients develop business plans. “Businesses crash and burn for reasons that are entirely avoidable,” she says. “A little planning now will save you a lot of heartache later.”

There’s plenty of help available for a novice business plan writer, from consultants to publications to websites and other valuable online materials, including templates and tutorials (see “Need help?” above). And since many resources are free or reasonably priced, writing a plan need not cost a fortune.

Like a resume, a business plan follows a common formula, with variations depending on your type of business, and whether you’ll use your plan to seek investments or loans from outsiders or solely for internal use. Plans to raise funds run forty pages or more; plans for internal use run as little as one page, but average about a dozen.

Here are the elements of a standard business plan:

Executive summary. This is key: It must capture the reader’s attention. It starts with a mission statement, short and sweet—a few lines or a paragraph. Then comes the company overview, describing the nature of the business, how you will develop it, and why it will succeed. For a startup, include your relevant expertise and the factors that led you to launch your business.

Many experts, including the SBA, recommend writing the executive summary last, after you’ve hammered out all the details in your plan.


Market analysis. “Start with market research,” Rosalind Resnick advises. “Bottoms-up forecasting is the only way to build a good business model,” the basis for your plan. Make calls to industry experts. Check out trade publications and relevant web sites. Visit and study potential competitors.
Then present this homework in your plan. Describe your industry, its size and trends, and projected growth. Talk in detail about your target markets and how your product or service fits. Who will you be selling to? How do you plan to gain market share? Analyze your competition. Identify any market barriers and how you will overcome them.

Company description. Describe the components of your business, how they fit together, and factors that will contribute to your success. “We had lots of debate on Energy’s components,” Elkin recalls. “The fitness industry is challenging. Many proven concepts are repeated over and over. We asked ourselves: What’s in demand in the market? How can we set ourselves apart? We developed a unique concept we thought we could deliver. And then we asked: Is it plausible? Is it executable?”

Organization and management. Outline your company’s organizational structure—who does what? Include a flow chart of key people and their responsibilities. Provide details of ownership as well as bios and resumes for every member of your management team.

Marketing and sales plans. Talk about your marketing plans for reaching customers and sales force strategies to achieve targets. How will you grow your business?

Product/service. Describe your product or service in detail, including benefits to potential customers, product life cycle, any proprietary information, and any R&D plans.

Financials. Most people find this the hardest part of the plan. An established business presents historical financial data; a startup forecasts data for the next five years. Include projected income statements, balance sheets, cash-flow statements, and any capital expenditure budgets. For a loan, explain how it will be repaid; for investors, explain how and when they will get their money back.

Rosalind Resnick suggests: “Put together a break-even forecast: What is your monthly rent, insurance, manufacturing costs, payroll—that’s the monthly nut. How many customers do you need to bring in the door to meet that?”

Matt Johnson recommends reviewing your financial projections with a CPA. Hire an accountant you know and trust who has small business experience, or ask around and find one, preferably in your industry or specialty. “Don’t hire the accountant for opinions about whether you’ll succeed, but to help you find hidden costs, tax ramifications, and so on,” advises Johnson.

Appendix. Include all your marketing research studies, and any other supporting materials.

If your business is small and privately held, with limited staffing or capital requirements, writing your plan shouldn’t take long—days or weeks at most. For a more complicated enterprise, however, be ready for revision. And that can be a very helpful thing, as the case of Matt Johnson and Randy Elkin’s business plan proves.

By the time Energy Fitness and Gymnastics opened its doors in January 2004, co-owners Johnson and Elkin had been working on their plan for eighteen months, meeting in the evenings. Their dream venture started out as a 150,000-sq.-ft. facility with a velodrome and rock-climbing center that would have required raising $2.5 million. But that model soon ran into liability and location issues. The cooling economy was also a factor. Over time, the facility shrank to 40,000 and finally to 8,000 sq. ft. “Hmmm. Much too small, we thought,” Johnson recalls. “Then we realized, but we’ll be in the black quickly. Wow, this actually is a home run!”

Along the way, the partners wrote fifteen drafts of their plan, testing creative scenarios, re-doing the numbers. Revision was easy because they had set up spreadsheets for startup costs, depreciation, payroll, profit/loss and balance sheets, plus projected fees and student enrollment numbers. “We kept plugging in new numbers, seeing a new picture emerge,” Johnson recalls. All that talk and work meant that we brought a final plan to our investors that we truly thought we could do, with great numbers.”

Their plan has also worked well as an evolving tool. For example, Elkin notes, it helped them foresee a summer slowdown and take measures to avoid a cash crunch. As they prepare to open a second, larger facility, Johnson and Elkin are using their original plan as a springboard. They will correct at least one mistake, namely their initial failure to budget money for surprise contingencies such as the additional lighting required by the city and the normal build-out problems associated with the construction process. Their next plan’s funding request will include an additional 15-25 percent for such unanticipated developments.

Gaining that kind of day-to-day control is the crucial advantage of doing a plan. “Entrepreneurs are creative, out-of-the-box thinkers and risk takers,” Johnson says. “But numbers don’t lie. We can all deceive ourselves and insist, ‘I know I can do this,’ yet there may not be enough time in the day, or enough money to pay your people and yourself, if you don’t have an honest, reality-based plan.”