Whether you are new to business or have been around for the long-haul, you need a business plan.
Maybe you think that you do not, or don't want to take the time to create one. That is understandable. Writing a business plan is a lot of work. In it, you analyze what you are going to do and how you will to do it. You crunch the numbers and dissect the competition. You scrutinize risk and ponder reward. It takes a lot of thought and research.
So yes, business plans are work, and you may in fact be the only person who ever reads yours. But if you are going to create a great small business, or grow your existing business, then writing a business plan is vital.
Here's an analogy: A pilot would never fly from Seattle to Miami without a detailed, well-researched flight plan. His flight plan helps him figure out how he will get to where he wants to go. It tells him how much fuel he will need, important landmarks to look for, and how long it will take to get there. It is his blueprint for a successful trip.
Well, your business plan is your version of a flight plan. It is your blueprint for a success trip. Creating a business plan forces you to carefully think through your business. It will detail how much money you need to either get started or grow. It will explain how you will deal with the competition. It will help you think through everything you need to do to hire and keep great employees.
Writing it will also sharpen your marketing ideas, help you understand projected costs and sales, and much more. By analyzing your business, both the things you know well and some you do not, creating a business plan forces you to really figure out what you are getting into and what it will take to succeed. It is your roadmap for a prosperous journey.
Creating and using a business plan also:
- Helps you avoid pie-in-the-sky projections.
- Allows an investor or lender to analyze whether your proposed business is worth their investment dollars.
- Helps you identify your market and competition.
- Allows you to understand your business better.
And keep this in mind as well: Because the plan projects where the company expects to be for the next few years and how it plans to get there, a business plan also serves as an important tool for established businesses. It lets them know whether they are on or off course. Smart businesses create, use, and revise business plans as necessary.
There are two major downsides to not having a business plan. First, without one, your enterprise will be a gamble. It may succeed, it may fail. Who knows? Certainly not you without one. So a well-researched business plan reduces the risk of failure. Second, without a plan, you will never attract an investor. If you require outside funding to get your business started, your investor will want to see your business plan. Whether it is a bank, the SBA, an angel investor, or a venture capital firm, a business plan is a prerequisite for getting funded.
In my next blog, I explain what you should include in your business plan.