Many investors will require a written business proposal before they consider lending you money. Sometimes, a landlord will require a business plan before leasing space to your business. The idea is that these people want you to be successful in your business venture, and they want to know that you as a business owner understand all the important aspects of your business and that you have thought through your situation adequately. These people also want a detailed description of how you plan to make money, so that you can pay off your loan (or keep up payments on your lease). Your plan is a way of showing the business community that you and your partners have done more than dream a big dream.

One very important reason to create a business plan is so that you can educate yourself about how money flows through your business. Writing a plan is just as important to you as it is to a potential investor. Not only does having a plan answer questions that potential backers will have, it also answers questions that you may have. It gives you an idea of your financial strengths and weaknesses. Naturally, once you know where the weaknesses are, you can take steps to correct them.

Creating a plan also gives you the opportunity to fine-tune parts of your business proposal without spending any money. If you have created a computer spreadsheet, for example, you can adjust profit margins to make changes in variables to see how they play out. This increases your chances of being successful in your business.

Unfortunately, most new businesses do not succeed. A business plan is one way of increasing your chances by helping you cover all your bases. It also helps you anticipate some of the pitfalls you'll encounter as your business grows. And the plan will help you determine whether you are on track (or off track) several months down the road.

Finally, if you are taking your company into foreign markets, a business plan is a standard measuring tool you can utilize to determine your potential away from the domestic markets with which you are more familiar.