A business plan is a very effective tool to having a successful business because it serves so many purposes and different aspects of the business. And it also gives you a constant reference source as to how well each part of the business is doing at any given time.

Not all people starting new businesses do have business plans however, and it is not always essential to produce an in depth plan for your business to succeed.

Even basic business plans will usually contain fore casted figures of profit and expenditure, as well as any possible expansion plans, your break even point and what you want to achieve with the business. It should also contain useful market research, both primary and secondary, assessing competition and market trends of your product.

The market research should take in the location of your business and from this how much demand you are likely going to have for your product. For example if you are a new business setting up on the edge of town, but there is a rival company in the town center already, then they will likely be a lot more busy than you.

Determining whether you will have a direct or indirect competitor early on is important as well. This meaning whether another business selling the same product as you is aiming at the same section of the market. For example a second hand car dealership would only be indirect competition to a limousine dealership. They share the same market but would likely only affect each other slightly, if at all.

You will need to know which of your rivals has what in terms of market share, and how you will carve out a space for your own business by taking customers from others. It is rarely the case that you can attract entirely new customers to a particular business. More likely they will be previous customers of your local rivals that are coming to you because of you having something new or some other advantage over the business they previously used.

From this you will have to include detailed financial projections for potential investors to look over. You will need to work out what a break even figure will be, as well as a cost per unit of the product or service you are offering. From here your profit per unit and what you expect your sales to be based on market research will also need to be factored in.

When applying for premises, loans, or even things like managers and employees, as well as financial stakeholders. A business plan will let them know you are serious and will also give them an idea of how successful the business is likely going to be after it begins trading (usually for the first 5 years in fact).