You’ve got a great idea for a small business and you want to get started. Or maybe you know you want to have your own business, but you haven’t yet decided on exactly what it should be. A good place to start, in both cases, is to ask yourself some questions to clarify and solidify your ideas, and prepare yourself to develop a business plan.

Why do a business plan?

First, making the effort to write out a plan will help you think about the different aspects of your business, such as the product or service you will be providing, your intended market, how you intend to reach that market, the resources you will need, how you will finance your business, and a timetable for implementing your plan and getting your business operations underway. This exercise will pay off in the long run, because it may make you think about aspects you had not yet considered. This can help you avoid potential pitfalls, and will show you the areas in which you need to concentrate your efforts. This could lead to innovative approaches or solutions. Of course, many of your challenges will arise when you are actually involved in the day-to-day operation of your business, but by thinking and planning ahead of time, you will be in a much better position to take on these challenges.

Your business plan will serve as a solid foundation for getting started. Based on your plan, you can develop your overall business strategy, which will set the direction you want to take in your business. Your plan and your strategy will help keep your business on track, and headed in the right direction. By giving you a solid base, a business plan can also provide you with the confidence to move ahead and take advantage of opportunities that arise, knowing that they are aligned with your original intent. In this sense, the business plan is a tool that provides a good starting point, but can also be modified and adapted as your business grows and evolves.

A business plan lends seriousness and credibility to your business. Based on your plan and strategy, you can start to build budgets for start-up costs and operations, prepare cash flow forecasts, and make other types of financial projections, such as pro forma income statements and balance sheets. This will give potential lenders and investors the information they need, will give them more confidence in your business, and will improve your likelihood of getting the financing your business needs for start-up costs and working capital.

A business plan will also help you manage the business itself. Having your plan as your foundation, and your business strategy as your direction, you will be able to foresee and overcome difficulties, identify and take advantage of opportunities, adapt to changes in the marketplace, control costs and maximize earnings.