Unlike the trusty paper road map, which has largely been rendered obsolete by GPS technology, a solid business plan remains a key asset for any prospective entrepreneur or small business owner. Many ventures undervalue business plans, particularly once they're up running, but they're a crucial tool for outlining where you've been as a businessperson, where you are now and where you hope to go.

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"The importance of having a business plan is all about having a systematic look at the opportunities and challenges that you may encounter as you're going into business," said David Wilton, director of small business for Scotiabank.

"It gives you the opportunity to go through your business idea and convert it from an idea into a practical business that you can implement."

Conventional wisdom suggests it is only important to have a business plan if you plan to make a pitch to prospective investors. While that is a necessity, a business plan is beneficial to any small business owner, even those who already have the financing they need. Wilton says although it may be difficult to set aside the time to create one, the investment will pay off.

"The demands of running a business on a day-to-day basis make it very difficult to sit down and do the research, and to do the thinking that's necessary to put a plan together," he said. "But it's important to understand that creating a business plan is one of the most important investments of time that a small business owner will ever make."

Mike Michell, national director for small business at RBC, points out that although a business plan should be drawn up when a business is established, the document needs to updated on a regular basis.

'It is not something you do once and put in your drawer and move on. You really need to review the plan constantly to ensure that it's really fitting the needs of the company."—Mike Michell, RBC national director for small business

"It is not something you do once and put in your drawer and move on," he said. "You really need to review the plan constantly to ensure that it's really fitting the needs of the company."

Michell says a business plan provides an entrepreneur with a focus — something to funnel your energy towards.

"When you're a business owner, you have a lot of different things coming at you very quickly," he said. "With a plan, you start to manage your time very differently because you're going to stay focused on what your priorities are."

The more you know

Wilton says the backbone of a successful business plan is research — ensuring you have properly identified any issue that may crop up, along with a strategy to deal with it.

"Research doesn't have to be hiring a consultant, it can be as simple as conducting a questionnaire with existing customers or having conversations with people who own similar businesses," he said.

Turning to other parties for information is especially helpful, since an entrepreneur cannot be expected to be sufficiently versed in all aspects of finance and economics.

"Small business owners tend to be very good at what they're going into business for — they're passionate about it and have the skills and knowledge of their product," Wilton said. "You [should consult a] good team of advisers around you, which could include an accountant, a lawyer, a small business banker, and potentially marketing experts."

Indeed, consulting others will help potential investors understand your business.

"The document will help somebody other than the business owner understand what the mission of the company is and how the company is going to go about being successful," said Michell.

Ideas are always shifting

As RBC's Michell pointed out, a business plan is an ever-changing document, shifting focus as a business progresses and grows. By the same token, Wilton says an entrepreneur should always be aware that the initial ideas outlined in the plan will change as well.

"When we have an idea, human nature dictates that we sell that idea fervently. But there is a difference between a good idea and a good business," he said. "For a small business owner, they need to go through a process where they're not married to an idea too soon and that they realistically look at the viability of the idea as a business."

Michell says an entrepreneur should also not strive to include too much information in a business plan because there is no way someone could be versed in every aspect of business right off the bat.

"As the company evolves and matures over time, more and more issues will [become] relevant," he said. "By no means do you need to solve all of these issues [at the onset], they’re just things you should start thinking about."

Building a business plan

Mike Michell and David Wilton point out a few key aspects of a solid business plan:

General statement

The opening statement in a business plan is a good place not only to indicate what your business is, but also how it is different than others in your chosen field.

The team

This not only means the employees or management team, but also any outside help you plan to seek out, such as a mentor or an adviser.

"Even if the plan is just for the owner, just articulating who they’re going to be working with is a very good idea because if an emergency crops up, you don’t have to stop and think about who’s in charge of what," Michell said.

Business environment

A crucial part of a good business plan is a critical look at potential competitors you may or, more importantly, may not want to be up against.

"It is imperative to take a look at whether you understand the industry you’re looking to go into," Michell said.

Examining the business environment also means looking at trends in the market, potential locations for your business, advertising, marketing and potential suppliers.

Financing

Examining financial projections should be the final stage of your business plan. Wilton says many entrepreneurs address these issues too early.

"That’s a significant caution I would make," he said. "Very often, small business owners will focus first on the financial without having done a careful review of all those other factors."

When the proper research is done with regard to financial projection, it presents a more accurate picture to potential investors. Wilton says a good business plan will include a cash flow projection, which will indicate the amount of start-up capital needed for your business.

"[You need to be familiar with] your inventory, equipment, receivables — all of those things will be in the cash flow estimates," he said. "When you take the business owner’s initial investment, the gap between the business owner’s investment and what the cash flow shows as the total cash needed will be the amount [needed from potential investors]."