The Importance of a Business Plan & How to Write One

The Importance of a Business Plan & How to Write One Main Photo

15 Dec 2022


Writing a business plan can be confusing, scary, and frustrating. We decided to break down the importance of a business plan and how to write one as we observe National Write A Business Plan Month.

What Is a Business Plan?

A business plan defines your business, identifies your goals, and serves as your company’s roadmap to success. It shows all interested parties — employees, investors, partners, and yourself — that you are committed to building the business. Creating your plan forces you to review market research and financial projections to develop strategies to propel your growth. The basic components of a business plan include a current and pro forma balance sheet, an income statement, and a cash flow analysis.

Why You Need a Business Plan

A business plan helps you properly allocate resources, handle unforeseen complications, and make sound business decisions. A good business plan is a crucial part of any loan application package because it provides specific and organized information about your company and how you will repay borrowed money. Additionally, it can inform sales personnel, suppliers, and others about your operations and goals. A business plan is not just for startups. It is a living document that should be updated annually as your company grows and changes.

SBA’s Components of a Typical Business Plan

The following is a guideline for creating your own business plan. Breaking down the plan into several components and working on it step-by-step can help make drafting it a more manageable task.


  • Give a detailed description of the business and its goals.
  • Discuss the ownership of the business and the legal structure.
  • List the skills and experience you bring to the business.
  • Discuss the advantages you and your business have over your competitors.


  • Discuss the products/ services offered. 
  • Identify the customer demand for your product/ service.
  • Identify your market, its size, and its locations.
  • Explain how your product/service will be advertised and marketed.
  • Explain the pricing strategy. 

Financial Management 

  • Explain your source and amount of initial equity capital. 
  • Develop a monthly operating budget for the first year.
  • Develop an expected return on investment (ROI) and monthly cash flow for the first year.
  • Provide projected income statements and balance sheets for a two-year period. 
  • Discuss your breakeven point.
  • Explain your personal balance sheet and method of compensation.
  • Discuss who will maintain your accounting records and how they will be kept.
  • Provide “what if” statements that address alternative approaches to any problem that may develop. 


  • Explain how the business will be managed on a day-to-day basis. 
  • Discuss hiring and personnel procedures.
  • Discuss insurance, lease, or rent agreements and issues pertinent to your business. 
  • Account for the equipment necessary to produce your products or services.
  • Account for the production and delivery of products and services. 

Concluding Statement 

  • Summarize your business goals and objectives and express your commitment to the success of your business.

Local Resources Are Available To Help

Whether you’re a first-timer branching out or a current business owner, the Butte College Small Business Development Center can help. The Butte College SBDC provides small businesses with access to no-cost expertise from experienced entrepreneurs.  Available services include one-on-one confidential advising, business planning, funding, starting your business, and marketing. 

Contact the Butte College Small Business Development Center today to get a jumpstart on your 2023 business goals, 530-895-9017.

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