Preparing a business plan is far from being a mere academic exercise. Your business plan will fulfil three important functions:

It will help you clarify and organise your thoughts

It will help you raise finance

It will help you monitor your business once it has started.

Let's look at each of these in a little more detail.

Organizing Tour Thoughts

When you are planning a business there are so many different things to consider that it is very easy to become confused. Putting the whole thing in writing can help you clarify your thoughts and assess the whole project more objectively. In addition, to complete the plan you will have to answer a lot of questions. This forces you to go out and do the necessary research to find answers, which in itself is an excellent discipline.

Raising Finance

If you need to apply for a loan, your business plan will demonstrate to the bank manager or lender that you have carefully considered every aspect of the proposed business, and that you know exactly how much money you need to borrow and what you will require it for. This will help reassure him that his funds will be wisely used. Even if you do not plan to apply for a loan, a business plan could help save you from losing your own money.

Monitoring Your Progress

The business plan sets down the path along which the business should be moving. When you first start your business there will be a vast number of things to do, and it is easy to delude yourself that you are doing well simply because you are busy Your business plan - in particular the cash flow forecast - will guide you through this period. With the plan at your side, you can take stock at regular intervals (every month perhaps) of how your business is doing. If you are failing to meet your targets, you can then decide on what remedial action to take...and the sooner the better!