QUESTION: Some friends have told me that I should have a business plan for the small business I am planning to launch in the near future. What do you think?
ANSWER: You will most assuredly need a plan for your business. You may, or may not, need a formal business plan.
Every business must answer three questions. They are:
1. Why should a prospective customer buy your product or service rather than a competitor’s?
2. Is there a segment of the market that values what differentiates your offering and is it large enough to support your business?
3. How will you reach this segment with your marketing message?
Every business, no matter how large or small must answer these three questions, either implicitly or explicitly. However, once you resolve these very basic issues, whether you need a formal business plan is a function of cash flow. If your business will have significant negative cash flow before it starts …