The value of a business plan is gained from writing it, not necessarily what you produce at the end. Whether it’s five pages or twenty-five, here are five good reasons to write a plan for your business.
- To set a road map to the future.
Your business plan provides a map for your business to follow. Thinking through the various sections of the plan and gathering the necessary information will help you:
- Thoroughly understand your business and market environment. Knowing the marketplace is more than just having a good idea. Have you done anything to prove the concept? Do you really understand who your competitors are and what advantages they have?
- Chart specific strategies. How will you beat those competitors at the game they are already engaged? What must you do to win and keep a customer? Identify that in your plan so that you can share it with others and see what they think about it.
- Detail alternative future scenarios. What are the alternative methods to deliver your product or service? How can it be marketed? What would be the most effective way to market based on your potential customers’ needs and buying behaviors?
- Set objectives and action steps. Establish some short-term and intermediate goals, not just the long-range profitability objective. What must be accomplished and by when? Set small goals to lead up to the ultimate successes, and then identify resources needed to achieve your goals.
- Manage more effectively. Knowing where you are going means avoiding side trips along the way. Spend time now to get to know your mission so that you can doggedly stay on course!
- To support growth and secure funding.
If you are seeking funding to grow your business, your business plan will be an important tool in your pitch to investors. It will help you:
- Identify the advantages of investing in your business. What the investor will gain by investing in your business? What makes your business a better investment than some other small business?
- Create a unique selling proposition. What makes you unique enough that you have a recognizable advantage over your competition? Going through the planning process will help you figure that out. Why will people buy from your business? What will make customers want to buy from you instead of your competitor? How many of those customers are there that will choose you instead of the other guy? A little market research now will guide you in the marketing process later and give you a much better chance for achieving the growth necessary for success.
- Build clear evidence of downstream profitability. What evidence can you develop in your research that clearly demonstrates your opportunity for success? If you can’t prove it now, you may not be able to achieve it later.
- To develop and communicate a course of action.
No entrepreneur can do everything on his or her own. Even if you’re a solopreneur, your team might include advisors, service providers, or contractors. Whether you have a team of two people or twenty, your business plan will help ensure that everyone is on the same page. It will help you:
- Align and focus your team. Give everyone on the team the same target and the same path and trajectory to hit the target. Everyone united for a cause means better chances to achieve the goal.
- Establish milestones for your work. Measurable step by step milestones help you determine if you are track toward your goals. Don’t wait for a year to go by to determine if you are on track. Set achievable milestones in your plan that help you identify your own progress. Investors also want to see progress, and setting milestones allows you to brag about the achievements along the way.
- Develop collaboration. Sharing a plan in development gives everyone on the team the chance to be engaged in the process and fosters greater participation. The collaboration makes everyone better and a stronger team player. Everyone understands the mission and the business program better if they have engagement in its development. They get the “why” without you having to explain it all the time.
- To help manage cash flow.
Regardless of how you measure profitability, you should define your business’ financial goals. Your business plan will help you:
- Identify break-even and manage by it. Figure out your basic costs and determine if you can actually make a profit at a price that will sell your product or service. Does it seem plausible, or do you need some more research? The planning process makes you double check your ideas, facts, and figures.
- Know the numbers. How many sales will you have to make to reach profit? Can you do that in the time period allotted in your plan? What else must happen in terms of costs and expenses, such as salaries, marketing, travel, or delivery? Completing the plan requires you to know your numbers up and down and making sure it passes muster!
- Set a course for profit and solvency. Fully reviewing the sales process right down to the payment schedule will put you in a position to manage your cash flow and be certain that you won’t become insolvent due to poor planning.
- To support a strategic exit.
It’s important to start your business with the end in mind. Whether you intend to sell your business once it’s profitable or hand it down to your children or grandchildren, your business plan will help you:
- Focus on creating value. If you go into your business knowing how you plan to get out, you’ll plan and operate in a different manner. Focus on value right from the first business plan.
- Know what determines a true valuation of your business. Don’t allow yourself to be sucked into overstating the value and then believing it! You won’t get your dream price if you have to sell out.
A business plan is not intended to be a static document. By periodically updating your plan, you'll make sure that you have a clear direction in mind for your company and that you're not getting distracted from your goals by the day-to-day tasks of running your company.
For more information about this and other topics, consider registering for the NaperLaunch Academy workshop series or scheduling a one-on-one appointment with a business librarian or NaperLaunch coach.