If you're preparing a business plan for an existing business, you'll find the financial and operating information developed over the business's life to be absolutely essential. This historical information can provide much of what you need for a written business plan. Your business's track record of operations is probably memorialized in a number of ways. You keep books, keep customer and supplier information, file government documents, pay taxes, and perhaps even have some employees with payroll records and personnel files. If your recordkeeping efforts are even more sophisticated, then you may also have cash flow projections, spreadsheets, and other documents that contain information you can use in drafting a plan.

By the time you decide to draft a business plan, the planning process has probably been going on for quite some time, at least in your head. Many portions of the plan will be derived from the analysis you performed as you thought about your idea. Nevertheless, assembling the written plan is more than an exercise in translating your thoughts to a printed page. You'll also have to gather together and organize a lot of specific information relating to your business and to the market you hope to reach. There are many potential sources for that information.

A business primarily engaged in the sale of products has a focus that is different from that of a service-based business. In a product-based business, customers don't, for the most part, expect extensive personal services to be performed as part of the deal. They want their box of chocolate, or their auto accessory, or their new flight simulator software.

The starting point of a service business is the fact that there are certain things that people will pay to have done for them. Maybe they don't know how to do these things themselves. Maybe they don't have the time. Maybe they don't have the special tools. Whatever the reason, your business exists because other people are unwilling or unable to do what you do. The focus of a service business is on results. So, from a planning perspective, what's of particular importance to a service business?

A business that provides its customers with both goods and services will probably have a somewhat more complicated business plan than a business that primarily provides either goods or services. There are many logistical considerations relating to managing the interaction between the delivery of goods and the performance of services.

The first rule in writing about anything is: who's the audience? If you don't provide the information they want, or if you display in a sloppy or disorganized way, then your audience may not bother. A written business plan has a large audience, foremost among them those external entities that provide things vital to starting and operating business.

Very few businesses deal exclusively in the provision of goods or in the performance of services. For planning purposes, however, it is useful to consider whether your business is primarily a service provider, a seller of goods, or both. Understanding the mix of goods and services that your particular business provides to its customers is vital when considering the key areas of your business. Issues that might be extremely important to a product-based business, such as inventory, can have vastly less significance for a service provider.

By its nature, a business plan requires you to project how events will turn out in the future. If the assumptions on which you base your planning are sound, the results of your operations may be very close to what you predicted. Over time, however, small deviations add up, and a plan that accurately predicted how your first few months would turn out will become increasingly inaccurate.

As you're developing your business plan, a crucial issue you need to keep in mind is who will read it and what they will expect to learn from it. One way to categorize the people who will make up your audience is to divide them into two groups.

Physically putting a business plan together requires you to translate your thoughts about how you're going to run your business (and how it will perform) into a format that is dictated, in large part, by the business you're in and the expectations of your audience. While most business plans share a similar structure and contain similar information about a business, your business plan will be distinguished by those characteristics that are unique to your business. Just as each person's resume differs because it reflects the particular life experiences of that individual, each business plan will differ. But the format makes it instantly recognizable as a business plan.

If you are to get the most benefit out of the planning process that leads to a written business plan, you have to be the most critical reader of the plan.

You can grow an existing business by going after new customers who are in your area but who don't do business with you. There are lots of ways to do it. For example, you might change your pricing structure to reach up or down the economic ladder, or advertise in a different medium. But before you take the steps necessary to reach that new audience, a business plan can help you evaluate if the increase in business will justify the time and effort you'll expend.

Existing businesses can often expand by offering their products and services through a new distribution channel. Many businesses that once sold goods strictly by mail order have now opened retail outlets in fancy malls. For example, certain brands of franchised fast food can now be bought, pre-cooked, in grocery store freezers. The decision to exploit a new distribution channel presents risks and opportunities that must be carefully weighed in advance. A business plan gives you the vehicle for that analysis.

If you're considering acquiring an existing business, how do you know how much to pay? Will the business provide you with the income you need three years down the road? A business plan is the perfect tool to use when you assess whether you should buy a business or let the opportunity go by.

An existing business serving an existing market can expand through the development of new products or services. For example, some payroll service companies are now actively marketing retirement plans to their customers. Launching a new product is definitely a time when you'll want to create a business plan. The scope of the plan may be limited to just the new product, provided that you've already planned for the time and resources that the project will require. If not, you'll have to revisit your existing business plan and integrate the new product project into the overall plan.

Although "new geographic market" might make you think of a large local chain expanding across the country, many small businesses also locate in multiple markets. You just need a sense of what constitutes a new market.

An existing business can expand by entering new markets in a variety of ways. Such an expansion absolutely triggers the need for some serious business planning. In order to reach most new markets, you will have to face many of the same issues that you addressed when you first went into business. In fact, you'll also have to deal with the fact that you have to divide your time between your ongoing business and your venture into a new market. There are three common ways to enter a new market:

If your business experiences gradual growth, at some point that expansion alone will make it worth your while to create a business plan that explores the opportunities that the growth might provide. For example, a production-based business might be able to acquire additional or better production equipment because the volume of business has reached a level that justifies the expense. Or, it might be time for a retail establishment to consider the costs, benefits, and risks of opening a second business location.

Starting a business is a big step. You have to have a good idea, flesh out all the details needed to put it into operation, and be firmly convinced of your ability to make it work. Having it all worked out in your head is one thing, but for most entrepreneurs, it's only when you take the time to create a written document that embodies your thoughts that you realize the scope and magnitude of what's involved in running a business. In your head, you've concentrated on the idea. In your plan, you can examine the nuts and bolts of running a business to exploit your idea.

When does it make sense to create a business plan? Few people wake up in the morning and say, "Gee, seems like a nice day to write a business plan." Taking on a project of this size isn't done lightly. But you have to keep the job in perspective.

Sometimes, no matter how well you try to plan, things just don't work out the way you expected. In some cases, there was something wrong with the assumptions or projections that were made when you first created the plan. In that case, the correct response is to revise the plan to better reflect your actual experience. When you correct your assumptions or projections, you can establish new, more realistic goals for your business.

Preparing for the future is what a business plan is all about. So why is it listed here as a separate reason for having a business plan? Simply because a business plan positions you to continue your planning habit beyond the period covered by your first plan. You've already paid the up front cost in time and effort to assemble a plan. Refining it, revising it, and extending your projections beyond the original planning window will consume far less of your time in the future.

Once you've created a workable business plan, it can serve you well as the tool of choice for tracking your business's progress.

When you go into business for yourself, you have to strike a balance between the risks that you assume and the return you expect to receive if you succeed. Obviously, no one likes to take big risks to obtain a small return. A business plan can be used as a modeling tool to look at a variety of scenarios.

Just as a person seeking a job prepares a resume that outlines qualifications, experience, and other relevant information, a business will have a variety of uses for a "resume" of its own. The business plan is that resume. To the extent that it reflects the reasonable plans of a carefully managed business, it gives its audience a positive image of what your business is and what it can be expected to do.