The importance of a business plan cannot be overemphasized in any business. They are just as important to a micro-business although they don’t need to be nearly as formal. If you are seeking venture capital or financing you’re likely to need a business plan of 50-100 pages. For a micro-business, you shouldn’t need more than 5.

A business plan precisely defines your business and identifies your goals. The basic components include a current and projected balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions.

Many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don’t have enough time. But just as a builder won’t begin construction without a blueprint, eager business owners shouldn’t rush into new ventures without a business plan.

Before you begin writing your business plan, consider four core questions:

• What service or product does your business provide and what needs does it fill?

• Who are the potential customers for your product or service and why will they purchase it from you?

• How will you reach your potential customers?

• Where will you get the financial resources to start your business?

What goes in a business plan? The body can be divided into four distinct sections:

• Description of the business

• Marketing

• Finances

• Management

Addenda should include an executive summary, supporting documents, and financial projections.

A business plan is a tool with three basic purposes: communication, management, and planning. As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners which are typically not goals of micro-businesses.

As a management tool, the business plan helps you track, monitor and evaluate your progress. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments. It can also let you know when when it’s time to shut down a particular venture. Each of your micro-businesses should have a business plan. That way you can compare the time and money you’re putting into each so that when you begin to get squeezed on on or the other you can shut down the worst performer.

As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. This is particularly important for micro-businesses that are run by more than one person. Having clearly defined roles in critical in these situations.

The SBA has a pretty good section on its website that discusses business plans in greater detail. Just remember that their target audience is small businesses that are looking for financing. Micros just need a short outline to keep everything defined.