A business plan, also known as a profit plan, is one of the most effective business tools you’ll use as an owner-operator. Think of it as a road map that allows you to track income and expenses over time, with the goal of reaching your desired financial rewards.
Though a business plan can take many forms, projecting short-range or longer-term business goals, at its most thorough a business plan helps you make ends meet. It shows you exactly how much money is needed for expenses, where it will be spent and how much you can afford to pay yourself.
Your business plan should show all sources of income and costs while taking into account industry averages, personal expenses and cash flow. It also should provide this complete financial picture in weekly, monthly and annual detail.
It also allows you to know when you have reached your break-even point -- after which every extra mile driven puts more money in your pocket.
[Related: Don't let success overshadow the necessity of long- and short-range planning]
The best time to begin the planning process is before you start your business. The process will give you targets, and these can be compared later with your actual financial performance to see where adjustments are needed to maximize profits.
