Q: I don't think I'm going to need a lot of money to start my business. Do I really need a business plan?

A: Whether you're raising $1 or $1 million, it's always a good idea to have a business plan to help you plot a course for future growth and profitability. That said, a "business plan" can mean anything from a few scribbles on the back of a napkin to a professionally prepared 50-page document containing an executive summary, a competitive analysis and a complex financial model forecasting five years of sales, profits, startup costs and cash flow.

If you're raising a small amount of money from friends and family, a simple plan outlining your company's objectives, risks and rewards may be all you need. But if you're raising a larger amount of money--several hundred thousand dollars or more--from a bank, an investor or a venture capital fund, a more comprehensive plan and financial model may be in order.

"Raising equity or debt capital from a more sophisticated angel, private equity firm or venture fund requires a very formal and in-depth business plan," says David Drucker, a virtual CFO who works with entrepreneurs and emerging businesses at The A Team Executive Management in New York City. "Given this audience, it is highly likely that the plan you prepare will eventually evolve and shift with new assumptions based on insights and recommendations gained during the fundraising process."

But a good business plan can help you do more than raise money. It's a tool to help you assess the feasibility of your idea and to understand the risks you'll face along the way. "Until you go through the very basic exercise of researching the market potential, the competition and financial feasibility of the business, you won't truly understand all the risks and rewards," Drucker says. "A business plan is also a great tool for laying out hopes and dreams and turning them into yearly goals, timetables and targeted financial results."

If your ultimate goal is to sell your business to a strategic buyer, he says, a business plan can help you set long-range financial targets to help you hit the numbers you'll need to justify the valuation you're shooting for.