Computing Development Strategies is a startup business that hopes to become a major supplier of certain types of computer training to the owners and employees of small businesses in the greater Chicago area. Its founder is a highly qualified computer trainer with extensive experience in providing training, developing training tools, and managing training and maintenance operations for a large computer corporation. He plans to build on his expertise by developing a group of courses designed specifically to help small businesses effectively use the most popular business software packages.

Breakaway Bicycle Company is a small manufacturer of high-end bicycle frames. It builds both mountain bike and racing bike frames for sale primarily to professional bicycle racers. However, increasing interest in mountain biking as a competitive sport and the exposure that bike racing received as a result of the Olympics have provided BBC with an opportunity to expand its business. Right now, a small number of BBC's frames are sold to non-professional riders who nevertheless want the very best equipment available, regardless of price.

Every business plan should capture the unique characteristics of the business and the people who will run it. What sets your business apart from its competitors? While we have provided a list of the documents that should be included in a business plan, the presentation of the recommended information is, to a large extent, a matter of personal preference. In order to illustrate how business plans can vary from one another, consider reviewing the three sample plans included in the following case studies:

A prerequisite to deriving the benefits you get from using your written business plan is to keep it current. You should treat your business plan as a dynamic document that should be kept current as your business evolves. While you might have initially created your business plan for a specific purpose (such as obtaining financing), the plan can serve you well in a number of capacities. It provides the baseline against which to measure your business's performance. It can help you to anticipate the impact of changing market and economic conditions.

Now that you have decided on a planning interval and on the timing of the planning process, what do you do in between the scheduled planning windows? Obviously, you can use the plan to track actual performance against projected performance.

After you've committed to periodically scheduling planning periods, how do you determine when is the right time to engage in the planning process? Most small business owners won't have the luxury of a "strategic planning committee" or some other dedicated group to handle planning on an ongoing basis. In all likelihood, you are the only person in a position to create a business plan. Since the demands of the planning process fall on you, don't schedule your planning period so that it conflicts with other demands placed on you by your business. If the Thanksgiving to Christmas period is your busiest time of year, don't schedule your planning process during it.

Many people think of "planning" as an annual process. Thousands of companies publish an annual plan each year, outlining their expectations about operating results for the coming 12 months. Realistically, though, you're probably planning all the time. Most business owners are always thinking about ways to make their business better. In discussing a "planning interval," what we're really suggesting is periodically setting aside a certain amount of time to create or update a written business plan. Part of this planning commitment includes deciding just how often and at what time of the year to set aside that time.

When things don't go well for a business, there's a reason. However, it isn't always easy to figure out the reason (or combination of reasons). It could be that your business plan contains some faulty assumptions or conclusions. Or, it could be that your business is having operational difficulties of some sort. In either event, you have to isolate the cause of the problem before you can correct it. Some problems will be internal to your business, while others will result from external factors beyond your direct control.

Despite your best efforts, sometimes a business just doesn't take off the way you expected. The unfortunate fact is that a large percentage of new small businesses fail. But then, most small business owners don't bother to create a written business plan unless they are absolutely required to (as is usually the case if you need outside investors or bank financing). Without the benefits that a written plan can provide, it's just that much harder to cope when your business isn't meeting your goals.

Once you've identified the factors that you believe are causing your business to deviate from the course you charted in your business plan, the next step is to consider your options. In some cases, you'll be able to directly address the problem. For example, if a vendor is consistently late in delivering needed materials, you can look for an alternative source.

Once you begin operations according to your business plan, there are two possible outcomes. One is that your projections and assumptions prove to be relatively accurate. In that case, it's likely that your business will be performing as you had hoped. More likely, however, things aren't going exactly as projected. These departures from your plan may be small and not a source of concern, or they may be substantial and require immediate action on your part.

Monitoring your business's performance is, again, another of those back office activities that doesn't contribute directly to providing goods and services to your customers. As a practical matter, you'll probably have a feel for how you're doing because of your involvement with the day-to-day activities of your business. If you make the bank deposits each night, if you pay the bills each month, if you balance the books at the end of the month, then you already know a lot about how your business is doing. But it's worthwhile to supplement this familiarity with some hard and fast milestones.

If the projections contained in your business plan were a little understated or pessimistic, you might find yourself in the enviable position of exceeding your planned goals and objectives. Perhaps you'll achieve profitability months sooner than you expected, or maybe revenues are exceeding expectations. Fortunately, if you've prepared your plan according to our suggestions, you already have a document that will help you determine why you're enjoying greater than anticipated success. When you developed your action plans, you engaged in some contingency planning to prepare yourself to react quickly and appropriately if something didn't go as you hoped. Those contingency plans identify the factors that are likely to be causing the deviation.

When you created your business plan, you made some conscious decisions regarding how to market your product or service. These decisions should help you select meaningful performance measures for your business. As a business owner, you need information regarding how the various areas of your business are doing. Tracking progress toward your goals and objectives means keeping abreast of how your business is doing currently. The very act of setting goals and objectives defines, in large part, the performance measures you'll adopt.

The purpose of tracking how your business is performing against your business plan is to gather, compile, and analyze performance information in order to meet or exceed your goals and objectives. Choose the information to collect based on three considerations.

No matter how good your business idea is, your analysis of the overall market situation may convince you that you can't profitably exploit your idea right now. There may be financial limitations, imposing competitors, or other factors that simply make it not worth your while to pursue your idea, however good. If you followed our advice and documented your decision making process, you'll have created most of a business plan anyway. The exercise will obviously have been well worth it.

A well-written business plan defines the goals and objectives that you wish to achieve over the next few years in specific, quantifiable, terms. It may project a certain level of sales by a given date, the acquisition of a certain number of clients, or any of a number of other objective measures of success. Whatever the conditions that spell success, you'll want to watch your progress toward those goals over time. If you're on track, great! If not, you're in a position to take steps to get back on track before it's too late.

The appendix is the repository for those items that aren't part of the plan itself but that are helpful or useful to someone reading the plan. It contains the material that supports and explains the conclusions and assumptions contained within the plan. If you think it is likely that a reader will seek further information regarding some portion of the plan, include the appropriate material in the appendix. That way, you avoid having to dig through the material you accumulated while preparing the plan if a question arises as to the information presented within the body of the plan.

An existing business can bolster the credibility of its business plan by documenting the results of its ongoing operations. A proven track record is very persuasive evidence of your chances for continued success. Hopefully, you've been creating and maintaining financial records since the inception of your business. If so, most of your work is done. The following list describes the types of information that you would ordinarily include in a business plan. As always, the relative importance of each type of document will vary with the characteristics of your particular business.

Financial ratios provide you and your audience with an objective basis for comparing the performance of your business with other businesses in your industry. In addition, financial ratios also provide you with the tools necessary to assess whether certain operations of your business need fine-tuning. The following list explains how each of the financial ratios is calculated and what it tells you about your business's financial health. The list does not include all of the ratios that you or your accountant might calculate. However, it does include those financial ratios that should be included in your business plan. They provide a clear picture of your business's ability to generate a profit, pay its bills on a timely basis, and utilize its assets efficiently.

If you're just starting out, you face a special challenge because you don't have an established track record on which to rely. There is no history of operations, profitable or otherwise. Instead, you must rely heavily on your ability to sell yourself as a potentially successful business owner. It doesn't matter whether you're using your business plan in an effort to obtain financing or to convince prospective employees to come to work for you. You need to convince whoever reads your plan that you have a genuine opportunity for success. In large part, your ability to sell yourself is a substitute for the historical information that doesn't exist.

Your projected cash flow is very important to most lenders because it provides an indication of whether you will have enough cash to pay your suppliers, vendors, and other creditors on time (not to mention the lender itself!). This information also functions as a planning tool for you. If your cash flow estimates show that you will occasionally not have enough money to pay your bills, you can arrange in advance for other sources of funds to get you through cash flow crunches.

Unless you are thinking of starting a religious or charitable organization, the primary reason you're starting a business is because you think you can make money at it. The drive to be your own boss might have caused you to quit being an employee and start your business, but the quest for income is what keeps it going. When you develop a business plan, financial projections and cash flow analysis are among the most critical elements.

No matter how carefully you plan, the likelihood of everything going exactly as you planned is small. When you made assumptions regarding the market and the capabilities of your business, you knew that those assumptions weren't precise. While your assumptions may have realistically accounted for reasonably foreseeable events, that doesn't ensure their accuracy. For example, if your business is dependent on borrowed funds and you plan to obtain and use a line of credit, you had to make some assumptions about interest rates. If you were realistic, you probably looked at a range of rates around your assumed rate to test the impact. Making alternate assumptions and planning around them is the best way to deal with events that are out of your control.

A projected profit and loss statement is a financial document that reflects the amount of profit or loss you expect your business to generate in future periods. This is an essential document that either you or your accountant should put together. It will be a useful tracking tool for objectively determining whether your business is likely to make a profit and be successful or generate losses and eventually fail.