I get asked that question a lot. In fact, after how do I start a business? its probably the most asked question by new clients. I decided the best way to describe why you might decide to write a business plan is to tell you a few stories about a client of mine. The name and business are fictional. Were going to call him David and hes going to have a mechanic shop. The stories Im going to tell you over the next few months are a combination of things that have happened to me and to some of my clients.

Davids smart. Hes got a memory like a steel trap. And hes ambitious. He wants to start a small mechanic shop with the inheritance his dad left him, and hes been very busy trying to get it started. But hes also young and in a bit of a hurry. The way he sees it, he doesnt need a business plan and anytime hes asked about it he just taps his head and says, I dont need one. Ive got it all up here. Besides, he likes freedom. Hes a fly-by-the-seat-of-your-pants kind of guy. He doesnt want to be tied to what some piece of paper says.

His mother-in-law, Ellen just shakes her head. Shes owned a bookkeeping service for the last twenty years, which she started because she wanted to be able to stay home when her kids were small. But David thinks, of course shed see it that way. Shes a bean counter and everyone knows how they are about details. Besides, hes already let her talk him into incorporating his business. The way he saw it, he didnt need to waste his money on it, but it was done. No way was he going to waste any more money on getting a business plan.

A few weeks later, David opened his shop for business. What a day that was. Hed been too excited to sleep the night before, and it ended up being an awfully long day because he didnt have any customers. Not a single one. Hed spent the day cleaning the shop and organizing his tools and sometimes just staring at the phone, trying to will it to ring. Oh well, he thought, what can I expect? The shops brand new and nobody knows about it. Someone will call tomorrow. By the end of the week, with no calls except from friends and family (who he was beginning to suspect his mother-in-law had told to call), he was starting to worry. He was also starting to run out of cash.

He barely scraped together the cash for his lease at the end of the sixth month. He didnt think owning a business would be this expensive. Besides, hed figured hed have lots of customers by now, but the truth of it was he didnt have enough to keep him busy for even half a day. David decided hed better go see his banker. It shouldnt be too be much of a problem to get the money, he figured. He had a good credit rating.

When the usual how are you, Im fine was over, David got right down to business. He didnt need much money. He figured $10,000 should do it. Sounds good, Shaun said when he was done talking. Lets take a look at your business plan. And when he said, Oh I dont have one. Ive got it all up here, she smiled and said, We need to have one before we can proceed with a loan. Come back and see me when you do.

As much as he hated to do it, he knew he had to borrow some money from someone. When none of his friends could help him beyond a few hundred dollars, he approached his mother-in-law. Well, she said, I can do that for you, but I have one condition. I want to give me half an hour of your time to listen to why I think you need a business plan. David agreed. He was getting desperate. Heres what she said:

• Almost half of small business startups fail in the first year.

• The main reasons they fail is because they lack management, lack planning, have insufficient financing and lack marketing.

• You can address all those reasons with a business plan:
  • Business plans help with lack of management with financial analysis, guide your decision-making, and outlining specific goals.

  • Business plans help with lack of planning by outlining the means to meet specific goals.

  • Business plans help with insufficient financing because financial institutions and private investors wont lend you any money without one.

  • Complete business plans include a marketing plan addressing lack of marketing.

• There are other reasons for writing a business plan:
  • Business plans help you monitor your progress.

  • Business plans give you something to compare your end of period results with.

  • Business plans help identify weak areas where you can improve.

  • Business plans help you avoid making the same mistake over and over again.

  • Business plans help keep you on track.

  • A good business plan includes a feasibility study, so you should know before you start whether your business can succeed.

  • Many self-help books proclaim goals are more easily met if theyre written so business plans help you identify and reach your goals.

  David was convinced. He accepted his mother-in-laws offer to help him write his business plan. After it was done, he went back to the bank and got his loan.

  So, how is Davids business doing? Im not going to tell you anything today beyond that hes still in business, but I will tell you more, I promise. Were going to use Davids business as a case study with more articles about him every month. Stay tuned for more stories about Davids business and find out how hes doing.