By Daniel LaBossière
Assistant Vice President, Business Development
Business Development Bank of Canada (BDC)

You may be tempted to think of a business plan as something you put together hastily when you need a loan and want to impress your bank.

But that’s not the way to look at a business plan. Instead, you should see it as an invaluable management tool that helps you set clear objectives for your company and describes exactly how you’ll achieve them.

Common pitfalls in preparing and using a business plan can be avoided if entrepreneurs take the necessary time to put together a sound document. Allow yourself ample time to do your research and adjust your plan.

Overall, it’s important to make sure your vision, strategy and plan are backed up by solid facts.

Here are a few areas where entrepreneurs should be particularly vigilant.

1. Include detailed assumptions

The core of any good business plan is solid assumptions. Think of an assumption as a premise that helps you forecast future results and allows you to simulate how your business will perform.

Entrepreneurs typically need to make assumptions about three key areas when writing a business plan: sales, variable costs and fixed costs.

In the simplest form, you’re projecting what sales you’ll need to cover fixed and variable costs. Business owners often fail to include detailed assumptions that are clearly broken down. You have to show that you’ve given your plan a lot of thought.

For example, your assumption might be that you’re going to get 1.5% of a particular industry market, which represents $1 million. However, you have to go further and break down your targeted market share so the reader understands how you are going to achieve your goal.

You need to build specific objectives you can aim for (e.g., five commercial contracts per month averaging $10,000). Detailing your assumptions and objectives will also help you establish specific marketing strategies and identify the required resources to meet your objectives. Everything in your business plan has to tie together.

2. Don’t forget start-up requirements

A common pitfall in business plans is omitting to cover start-up requirements. It’s not enough to simply say, ‘We need $400,000.’ It’s important to clearly outline the specifics so that the reader feels that you’ve done your homework.

For example, you’ll be looking at factors such as how much equipment you’ll need. Do you have sufficient working capital? Will your real estate needs change? How about your hiring needs? What are your possible sources of funding and how will they be used? These details give your plan credibility and build confidence that you know exactly where you’re going.

3. Provide supporting information

Backing up your assumptions is also crucial when writing an effective business plan. If you’re trying to make a case, you’ll need the ammunition to support it.

Supporting information can include feasibility studies, surveys, market analyses, key competitive information and industry overviews. The reader should see clear footnotes that point to your supporting information. Keep the information clear and concise. Bankers want to see the facts, but avoid overwhelming the reader with irrelevant data.

4. Emphasize human resources management

Business owners often overlook key areas such as human resources management in business plans. HR poses many challenges to entrepreneurs, particularly when recruiting in a tight labour market. You have to show that you know precisely how you’ll attract skilled staff to operate your company.

Business plans should include your organizational structure, as well as clear HR requirements such as recruiting and outsourcing strategies. People are the core of any business, so your overall company strategy has to address intangible assets such as employee skill sets and knowledge.

For more help, entrepreneurs can visit the articles and tools section of BDC’s website and download our free business plan template.