Most of us have heard the familiar saying "Fail to plan: plan to fail." According to Steven Scheff, a professional business consultant and instructor at Florida Gulf Coast University, that phrase is a cliché because it's true. At a recent seminar at FGCU's Small Business Development Center, Scheff likened a business plan to a roadmap or a trip plan.

Typically, business owners see the business plan as a way to procure a loan, lure investors or start a new business. After the plan has accomplished one of these goals, it is usually put on the shelf to gather dust. A business plan is also important before a company introduces a new product or if a company is changing markets, location or position in a market.

But sadly, the business plan is often overlooked as a management tool. Scheff advises that a business plan be updated every year and used as a measurement for company performance each quarter.

Write it Down

A plan isn't a plan until it's put on paper. "It's better to figure things out on paper than in the field of battle," said Scheff. The plan helps define your thinking, uncovers potential roadblocks, establishes credibility for the business and forces a commitment.

A complete business plan is comprised of the following sections:

· Description of the business

· Analysis of the market

· Marketing strategy

· Management ability

· Financial information

· Projected income statement

· Cash flow projections

· Cash requirements

Business Description

Obviously, the plan must begin with an explanation of the business. Grab the reader's interest from the very beginning of the plan. In a compelling manner, explain the type of business and what the products or services will be offered. "Emphasize growth potential," advises Scheff. "Clarify the uniqueness of the business and the competitive advantage."

Market Analysis

What is the complexion of the market in which the business will operate and compete? Describe the attributes of the target customer, why they will buy the product or service, and how they will be attracted to the offering.

Define the size of the potential market. In addition, identify and briefly describe the competition. "Some competitors may not even be in the same business," warns Scheff. For example, competition for a restaurant may include the growing number of prepared foods available at supermarkets.

Information on competitors can be found by doing research in a library or over the Internet. Personal research is also valuable. For example, one may call several competitors as a potential customer, or go to competitor's parking lots to do traffic counts.

Marketing Strategy

Traditionally, a marketing strategy includes four elements. First, include a brief description of the product or service. Second, explain how the product or service will be priced. Third, explain how this positions the offering in the overall market. Finally, describe what promotional activities, such as advertising and public relations, will be used to attract customers to the business.

Management Ability

The experience and qualifications of the owner(s) and key personnel can make the difference between a profitable venture or an embarrassing failure. In this section, provide resumes for all key management individuals.

Financial Information

Outline a personal financial statement for the business owner. This is necessary because, according to Scheff, if the goal for the business plan is to procure a loan for the business, the owner will need to personally guarantee the loan. The owner's personal credit history is a vital criterion in determining the viability of the loan.

Project the volume of sales and direct expenses (also called variable expenses) associated with operating the business. To determine direct expenses, calculate the cost of sales, including materials, direct labor and production overhead. Compare this to the average for the industry.

From this information, calculate the net income expected from the venture. Sales minus direct expense equals gross profit. Include projections for the first year by month. Projections for the second and third year should be done by year.

Next, estimate the period expenses (also called fixed or indirect expenses) for a typical month. This category includes salary, rent, utilities and insurance. Total these expenses -- gross profit every month must be more than this in order for the business to break even or profit.

If the goal of the business plan is to achieve a loan, include a brief section outlining the sources of funding for the business. Indicate how much of the owner's personal money is being invested, loans from relatives or other investors and loans from financial institutions or other sources. Then itemize where these funds will go, such as towards equipment, fixtures, inventory, lease deposit or working capital.

Cash flow projections are different from the projected income statement. Stocking up on inventory or buying equipment doesn't change income, but it does significantly affect cash flow. Include a cash flow projection, showing expected expenses, such as inventory investments, versus the expected rate of collections on sales. "Very successful businesses can fail," said Scheff, "because they buy inventory faster than they collect on sales. Do the homework in detail."

Due to the thinking process involved in preparing the financial section of the business plan, it is important that the owner develop this personally. "It's smart to work with professionals like accountants, attorneys, or advisors who can lend their expertise," stated Scheff, "but the owner needs to do the work."

Tips for Starting

Start now collecting information for each section of the business plan. Some sections, such as the personal financial statement, may be prepared immediately. Other sections, such as the marketing strategy or market analysis, may evolve over a longer period of time. Read newspapers and business magazines. Attend classes and/or seek counsel from advisors.

Most importantly, start. Draft a preliminary plan "Think of it as preliminary," said Scheff, "to give you freedom of thought."

Most importantly, take the time to evaluate as the plan takes shape. After all, the business plan should provide best representation of the business possible.

For several years, Cynthia Jackson was a director at NCR Corporation and AT&T Corporation. She is currently a freelance writer and co-owner of the Southwest Florida franchise for UCC Total Home, a nationwide buyers' cooperative.