Why Business Plans Matter

Jerome Engel
Founder and Executive Director
Lester Center for Entrepreneurship and Innovation
University of California, Berkeley

Problem: You don't know where to start and don't want to waste time struggling over something that might not get used.

Reality: Everyone you ask for money — the Small Business Administration, bank loan officers and venture capitalists — will ask if you have a business plan. "A business plan is more than a document, it's a process that enables an individual, and more importantly a team, to come together and commit to a business adventure of significant personal and professional risk," says Engel.

The right way to get the job done: Think of the plan as a communications tool. "A strong business plan evaluates the opportunity, quantifies the resources required and lays out a road map for implementation. It should integrate all the functional elements — marketing, sales, operation and finance — into a single cohesive force," Engel explains. "If it sounds similar to the role of the CEO, that's not a mistake."

What to watch out for: Thinking that the business plan is just a document. "In reality, the presentation of the plan is just as important as the plan document itself," notes Engel. "The communication of the plan can't just be a canned presentation with slick slides. The ability of all members of the entrepreneurial team to articulate and discuss the plan in an interactive manner is the mark of a great plan. Each individual should be capable of presenting any portion of the plan if called upon."