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Hundreds of years ago, Magellan, Cabot and Drake explored the world. Their successors, Gates, Page, and Cubin have become the explorers of our new world. Like their metaphorical forefathers, these modern day explorers choose a destination, set a waypoint and set off, constantly retooling and updating their map as they go.

Creating a business plan is a critical step in any new business venture. Would you trek across the country, from Montreal to Victoria, without a map? Would you build a house without a blueprint? Would you bake a cake without a recipe? While some might answer yes to all three of these questions, I would be reluctant to be their travel partner, live in their house or eat their cake.

I receive questions from entrepreneurs daily and the best ones are answered on my blog (www.SeanWise.com). Some questions however, are of such importance that they need to be addressed in a larger forum. "Do I need a business plan?" represents one such question. The short answer is yes, unequivocally yes You need a business plan for your venture, whether it is big or small, a startup or global player, raising money or bootstrapping. You need a plan.

A business plan is a comprehensive statement that includes the objectives of your business and how you intend to achieve them. Unless you are working alone (even then, I think you need a plan), have no need for outside capital and have not prioritized growth and expansion, you need to write a business plan.

The Top 5 reasons why you need a business plan:

1. Creates a common starting point:

By its very nature, a Business plan is a concise statement indicating the current stage of your business. . If done correctly, it will contain all the information outside parties, such as investors, future employees and bankers, will need to make a decision with regard to your venture. The Business Plan, allows your reader to quickly review the key areas, such as management, technology, customers, industry metrics and the financial model. By using a standardized format, readers are able to easily identify your venture's key metrics, models and performance indicators. Without a plan, stakeholders have to rely on the oral representations of management or worse yet, have to review hundreds of documents themselves, before gaining confidence that management is "up to speed."

According to Benoit Hogue from Propulsion Ventures, a business plan is not so much the document itself, but all of the material and thought that goes into creating the document: "Founders should see the business plan as a collection of blocks (i.e. a budget, a product Roadmap and white paper, marketing plan, etc). These blocks when put together really synthesize the entrepreneurs' overall thoughts on the venture."

Not only does it provide a one stop shop for the vital information stakeholders require, but a well written business plan gives stakeholders a common place to start a dialogue, which is extremely important if you are looking for external parties to buy into your venture.

2. Sets the goals & shares your vision:

How do you know where you are going or even when you have arrived, if you do not set goals? Going back to our earlier example, of trekking across the country, from Montreal to Victoria without a map, the business plan not only informs your route, but also specifies the destination or "waypoint." Without your final waypoint, you cannot possibly plot your journey. In fact, until you set such, you should not even attempt your endeavour. The same is true for business. If you do not have goals, how will you plot your course? Stephen Covey, who sold more than 15 million copies of his book, The Seven Habits of Highly Effective People, said it best when he named goal setting (i.e. Begin with the End in Mind), as the second required habit in his seminal guide to success. He knew that the true role of management is to do just that, manage the business. This necessitates setting goals and tracking the venture's progress toward meeting those goals.

Goal setting is also necessary for the ongoing alignment of teams. Whether that team is made up of other founders or includes outside investors and stakeholders, you need to ensure the team in its entirety is on the same page. This page must come from the Business Plan.

Finally, in addition to alignment, goal setting helps you manage your progress and gauge your success. It allows you and the other stakeholders to establish accountability, monitor your progress and if required, adjust your strategy.

3. Sets the path & identifies required resources:

Every business, no matter how small, needs a working plan for the future, detailing where you are now (i.e. the starting waypoint), where you want to be (i.e. the final waypoint), how you are going to go from the former to the latter, how long it will take and what resources you need to make it happen.

Business plans assist in identifying the lacking components, such as cash, personnel or distribution agreements and when such is required to be in place. Knowing what is needed and when such is needed, helps to ensure that timelines are maintained and pursued. Therefore, by writing a business plan, you can swiftly identify the key areas that require more attention. This in turn assists in prioritizing tasks, which is something that entrepreneurs must continually address.

A business plan is a blueprint of the steps you will need to take, in order to build your business and outlines the resources that are necessary to complete the project.

4. Forces analysis:

Not only does writing the business plan force you to crystallize your strategy and concisely share your vision, but it also forces you to analyze your position, research key strategies and prepare responses to investors' questions. For a list of such questions, please click here:

The process of writing the plan, forces management to take a step back, to scrutinize, set assumptions and determine the appropriate course of action. Although I have participated in various forms of strategic planning, I have yet to find one as efficient or effective, as writing a business plan.

Those who refuse to write a plan, often find themselves answering key questions in front of investors during a pitch, rather than in the comfort of their own office, when they have the time and bandwidth to give such their due.

5. Creates confidence:

A good plan is one that addresses key questions and lays out a reasonable strategy, while concisely conveying management's passion and vision. These types of plans instill confidence in potential investors and other external stakeholders. Specifically stated, VCs and Angel investors, not only expect management to do this, but to be able to do it well. In this way, a business plan reflects that founders understand what it takes to succeed and are able to convey their vision to achieve success.

Reasons not to write a plan and why they are incorrect

Irrespective of the aforementioned, entrepreneurs overburdened with priorities and under resourced, continue to put forth reasons why they cannot or do not want to write a business plan. Here are a few of my favourites and why they are invalid.

"But I heard investors don't read plans, so what is the point"?

While it is true that some investors, might not spend as much time reading full plans as you would like them to, all investors do read the executive summary, which is of course based on the financial and entire business plan. According to Susan Wu, from the Menlo Park office of Charles Rivers Ventures: "VCs absolutely pay attention to the executive summary. The executive summary is your calling card and it determines whether or not you get to the critical next step - the face-to-face meeting. You should approach the executive summary the same way you would an elevator pitch — make it: brief, pithy, and tantalizing. Writing a full business plan helps you conceptualize all of the nuances of your business and this understanding is crucial in helping you succinctly articulate your startup's unfair advantage."

Similarly, most investors will conduct initial due diligence, by discussing with entrepreneurs issues that are covered in the plan. Hence, entrepreneurs need to write a plan, if for no other reason than to prepare for such questions.

"But I'm too busy running my business to write about my business."

Are you too busy driving to fill up the car with gas?

"Can't I just hire a consultant to write my plan?"

It is absolutely fine; in fact I recommend it, to involve others in reviewing your plan. In my opinion however, it is absolutely unacceptable to outsource this task. After all, who else knows your business better than you?

The founders must write their business plans. There are many reasons for this, including, but not limited to:

1. The plan is less important than the process that goes into forming the plan, as stated above. This process, which can take up to hundreds of hours, forces management to consider all factors. If a consultant, here today gone tomorrow, undertakes this process, then all the information and analysis undertaken during the writing of the plan, leaves once the plan is finalized, which is simply unacceptable.
2. As previously relayed, management's most important function is managing and you certainly do not outsource your main function. What message would it communicate if someone else set your strategy?
3. The founders will not only have to speak on behalf of the plan, but live with its consequences. Do you really want someone uncommitted to the project setting the goals, strategies and tactics for the business that you will ultimately dedicate all your waking hours to?
4. You are supposed to be the expert in your field.

"Business is dynamic. Business plans are static. Isn't your business plan out of date the moment it comes out of the printer?"

Although this might be true, you need to see business planning, as an ongoing process. I ask each of our portfolio company CEOs, to revisit their Business Plan at least once a year. This allows for a period of reflection, on what worked and what did not and for adjustments and course corrections to be made en route.

Just as a business evolves, so must a venture's Business Plan. You must therefore, view your Business Plan, not as a biblical guide, but as a snapshot of strategic belief that must be revisited and revised on a regular basis.

"But isn't a plan based entirely on assumptions, just a recipe for disaster, after all Garbage in: Garbage out?"

While it is true that Business Plans are based on "best guesses," I would take an educated guess over nothing at all, especially a guess made by someone who is allegedly a leader in their field.

Most investors do not expect your Business Plan to be correct, especially the financials, but they do anticipate one that is reasonable and well thought out. Further, no VC that I have ever met returns to their portfolio company five years after investment, with the original business plan in hand, in search for things that do not match.

The bottom line

You need to write a Business Plan, with emphasis on "YOU". Yes, it will not be 100 per cent accurate. Yes, it will take hundreds of hours. Yes, investors might not read it cover to cover, but without a Business Plan, your ship is sailing not just without a map, but without a compass as well. And although you might accidentally "discover" the new world, it is more likely that you will be lost at sea.

Sean Wise, BA, LLB, MBA is the Managing Director of Wise Mentor Capital (www.WiseMentorCapital.com), a national venture capital consultancy focusing on bridging the gap between entrepreneurs and capital.

Sean currently sits on the Boards of the Canadian Venture Forum, the Banff Venture Forum, the Toronto Venture Group and Silicon Valley's IBD Network. He speaks at more than 20 Entrepreneurial Bootcamps and events across North America annually. Sean is the online host and industry advisor for CBC's hit business reality show <a href=www.INSIDEtheDRAGONSden.com target=_blank><B>Dragons' Den</B></a>

His monthly column on www.theglobeandmail.com/smallbusiness covers a wide range of topics on entrepreneurship and venture capital as does his blog found at www.SeanWise.com.