Once you present a business plan to an investor or lender, questions may begin to fly at you. If this happens, do not be alarmed! It is evidence that they are truly interested in your business. You can prepare for these questions by running through potential questions, like these seven, ahead of time.

“Why did you choose to begin with this target market?”

“We have to start somewhere” is not a great answer. Consider why the costs are lower or returns greater with your chosen first target market, or, better yet, how tackling that market first will make entry into additional markets easier later on.

“Why can’t competitors imitate your competitive advantage?”

Know the strengths, weaknesses, and branding of your competitors to understand what will stand in their way from doing what you are doing. It could be that your competitive advantage is contradictory to what they are trying to do or that you have protected intellectual property in your business, for example.

“Why is your team best qualified to launch this company?”

Funders know that there are potential managers in the job market who could be hired to run a startup like yours. Know how your chosen team combines industry, functional, and leadership experience with an understanding of startups.

“What best practices of the industry will your business use?”

Study best practices companies in the industry use to become more efficient and know which will translate into your startup, which can be implemented only as you grow, and which will not be possible because of their conflict with your underlying strategy.

“What is your unique selling proposition (USP)?”

If someone asks what makes your new business unique, you had better have an answer. This should be stated explicitly in the business plan.

“What would it take to reach break even sooner?”

Be prepared to defend the time you estimate it will take for the company to break even and to start making a profit. If funders want to see you break even sooner, know what it would take in terms of different staff, additional resources, or increased investment, but do not be too quick to push your schedule up. This only shows funders that your estimates were based on flimsy assumptions to begin with.

“What are your projections of growth based on?”

Be able to explain the assumptions about the market and your company’s conversion rates (of potential customers to actual customers, for example) which led to your projections of growth. You should know how your projections compare to other success stories in your industry and in other industries so you can be sure there is precedent for the growth you anticipate.

Looking back I don’t think I’ve ever written specifically about business plans before and the more I think about it the more I realise why, because they’re usually a pretty boring subject.

Let’s be honest, business plans are not fun things to write or to read, so I’ve quite happily avoided the subject up to now.

So why the sudden change of heart?

Well, my view on them is a little unconventional and I figured it’s time I told you why.

Admittedly I can think of a few reasons why you might write a business plan, but I can think of whole lot more reasons why you shouldn’t waste your time on them.

The fact that business plans are quite boring to write isn’t a good reason not to write one. However, here are my top five other reasons why you shouldn’t waste your time on one:

Business Plans are Guesswork

Almost everything you write in your business plan will be guesswork. Even worse, there’ll be some pretty inflated and optimistic claims in there that won’t reflect reality at all. Here’s some reasons why you’re going to be doing a lot of guessing:

o You don’t really know how many widgets you’re going to sell until you try to sell some.

o You don’t know what price point to use until you test to see what your market will accept.

o You don’t know whether your customer even wants your product/service until you find a market and ask them.

o You don’t know how to market your business until you try various methods, split test and see what works.

o You don’t know how new tools like Twitter might transform you business, if they aren’t yet invented when you write your five year plan.

So we’ve established that a business plan is largely a work of fiction. What other reasons are there not to write one?

They Give You a False Sense of Security

I don’t mind admitting I’ve written business plans in the past for some pretty bad ideas. Yet, I managed to make the business sound really viable, enough to fool even myself.

This is a dangerous thing to do because having a plan in place which looks great can give you a false sense of security.

With all the guesswork involved you’ll have a free rein to make your plan reflect what you want to happen, rather than what is likely to happen. This can lead you to think you have a great idea when maybe you don’t.

If you use your plan to convince other people it’s a great idea then the problem can escalate. Now those you seek approval from also think it sounds like a good idea, all based on fiction.

Those who have read anything I’ve written before will already know that I believe guesswork doesn’t contribute to a good business mindset and should be avoided whenever possible.

It’s best to just take action, try it out on a small scale with minimal cost and you’ll know very quickly whether it’s a good idea or a terrible idea.

Writing a plan doesn’t make your idea any better, it jut makes it sound better.

No-one Reads Business Plans

Besides yourself while you’re writing it, who are you expecting to read your shiny new 80 page business plan?

An investor might pretend they’ve read it all but the chances are they’ll only read the salient points. They could have established these anyway with a five minute conversation with you.

If you ever have time to read your plan yourself after you’ve written it then you’re probably not spending enough time actually running your business.

You can refer back to specific sections, but these will probably be outdated and obsolete just weeks after you’ve written them.

If you do refer back to it, the optimism you had when you wrote it might inspire you, until you realise the path your business has actually taken is nothing like what you planned.

This isn’t a failure on your part to follow the plan, it’s often a good thing. Let me explain why in my next point.

Your Business Should Be Flexible, Not Rigid

Your business needs to be flexible and dynamic. It needs to adapt to your customers needs, to the changes in the market, to the economic climate, to the available technology.

It needs to evolve as you experiment with advertising media, copy, headlines, price points, offers, social networking and split testing.

As you create a market you’ll be surveying them to find out what they really want from your business and then you’ll be creating exactly that.

You’ll be creating goals that you want to achieve and tracking them weekly or monthly using a spreadsheet.

The common factors here are flexibility, experimentation and adaptation.

Now tell me where a rigid five year business plan fits into this scenario? It doesn’t, because a rigid plan is the last thing you need.

Business Plans are a Distraction

Depending on what sort of business plan you’re writing it could take from a day to a week to write. That’s valuable time you could be spending actually creating and trying out your business.

I’m all for knowing exactly what you want from your business and creating one which supports the lifestyle you want. But let’s not be getting goals and plans mixed up here.

You should definitely have goals, and you should definitely be tracking your progress against them.

However kidding yourself that you know at the very beginning exactly how you’re going to achieve them isn’t going to help, because you can’t possibly know without experimenting first.

Allow yourself to be flexible, experiment and work out what takes you to your goals the faster. That’s a much better use of your time than writing a rigid plan that’ll be out of date a week after you wrote it.

I know my views on this might be a little controversial but I feel it’s only right that I share my thoughts with you. The time you save by not writing a lengthly plan will allow you to concentrate on more important things, like making your business actually happen.

Now my guess is, if there’s one thing that’s been annoying you the most as you read this it’s probably that if your business needs external funding then you do need a business plan. I agree, if you have no choice then you have to create on, that’s obvious.

If this is the case for you then write whatever your potential investors want to hear, as long as it sounds realistic.

Don’t spend forever on it though because when your funding’s in the bag you should put you business plan in your bottom draw and start the real work, figuring out what actually works and doing more of that.

Whether you are a start up or established business, and whether you are a non-profit organization, writing a business plan can be one of the most useful things you can do for your business. Obviously there are different types of business plans depending on the nature of your company or organization. It’s not enough that you have a “hunch” your new start up will be a roaring success, or you believe your latest web. 2.0 idea a surefire “ten bagger” success for the lucky venture capitalist. There are people who need to take a close look at your business plan; whether it’s you, internal management or external investors. In this article, we will look at the top three reasons for writing business plans.

First to answer the question: “Is the business feasible?”

Before you actually commit funds, manpower and time on starting a business, it helps to actually have a “dry run” to see if the venture you have in mind has a good chance of success. The business planning process forces you to look at what your competitors are doing and to ask yourself how you can differentiate your product or service. Typically we call this a SWOT analysis – Strengths, Weaknesses, Opportunities and Threats. At the same time you want to identify, as clearly as possible your unique selling proposition. This can be a special feature or something unique about your branding. Just be different and attractive in the eyes of your target market. Going through this process will give you a better idea of you chances for success in the marketplace.

Then look at your projected financials – do you have the required funds to start your business? Where are you going to raise the capital? How soon will the business break even? All of them are pertinent questions.

Secondly, a business plan is used to help secure loans from banks or financing from outside investors. Typically if you are a start up, you will find it very hard to get any financing from your local bank unless you have landed collateral, regardless if you have a plan written or not. If your business is established for several years and have healthy cash flow, then the bank will definitely want to see your financials before given you any loans or bridge financing.

If you are looking for angels or venture capital investment, then a business plan, particularly the executive summary is what they will require. What’s more important to these investors, more than the plan itself, is the entrepreneur’s track record and the strength of your management team. Be sure to include these important points in your bplan.

Last but not least, a written business plan should be constantly evolving. It acts as a blue print to guide management in the execution of business strategy and to meet goals. By constantly reviewing and updating the plan, it is used as a useful communication tool within the company to guide business growth.

We’ve looked at some good reasons from writing business plans. Now, if you don’t think you know how to write one, help is available. Look for a template online, such as at the site given below. Or better still get business plan software. The good ones, such as Business Plan Pro 2007, are easy to use and will guide you to input the necessary text and numbers and come out with a complete plan for you. There’s absolutely no reason why any business person should not have a business plan blueprint.