7 Reasons You Need A Business Plan
“Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression.” (Sir John Harvey-Jones)
Many entrepreneurs and business owners hear the term business plan and begin to get nervous. They think that it’s going to take them months to prepare and require the destruction of a small rainforest to produce it.
More importantly though, they don’t know where to start.
So, let’s be clear right up front; as it’s one of the most common questions I get asked as a business advisor, if you’re setting up a business, or looking to move into new areas, and you don’t need any outside funding, then you don’t need to have a business plan. You won’t be breaking any law or breaching some entrepreneurial code of conduct.
But, that’s not to say you shouldn’t have one.
Documenting your thoughts, identifying your target market and prospective customers, doing your sums and figuring out your strategy, will stand you and your business in good stead for long term survival and will serve as your guide to keep you on the track to achieving your goals. Business plans can be simple, they don’t need to be complex and they can even written on a single page.
Whilst you might be thinking that a business plan is confined the start up community, a business plan is just as useful whatever stage of buisness you are at. For example a business plan can be used for:
– Entering a new market
– Introducing a new product range
– Adopting a new strategy
– Building a new factory
– Acquiring a competitor
– Raising finance
– Exiting a business
– Building a new website
Plus many more….
When I work with clients I get them to write a business plan to cover the next year which we review and update at least quarterly.
In fact one of my personal favourite business quotes which can be applied to business plans as well as all aspects of planning in business or in life, is attributed to Alan Laekin, reads:
“Failing to plan is planning to fail”
If you’re reading this article because you’re not convinced that you need a business plan, then here are 7 good reasons why having a business plan is a good idea:
A Business Plan Gives You…
1. Clarity In Your Thinking
Writing a business plan allows you to think more clearly about what you’re trying to do and what you’re hoping to achieve. Which in turn will make it easier to explain your idea to others.
2. Gaining a Deep Understanding of Your Target Market
Taking the time out to research your business plan idea will give you a deep insight and understanding of the industry or market you’re looking to enter way before you actually commit to entering it.
3. Puts The Right Things In The Right Place
A business plan pulls together all the relevant bits of information in one place such as revenue targets, expense projections, the goals for your business and the route map to get you there. Making it easier to keep track of your progress as well as keeping you focused on the long term plans for your business, all in one piece.
4. Testing out Your idea
Let’s be honest, many ideas sound great when you’re in the pub. However, in the cold light of day when the hangover has worn off and you get it all down on paper and create your financial model, you’ll discover whether it really is possible to hit the revenue and profit targets you thought you could after a few glasses of Merlot.
5. Aligning goals
Writing a business plan is a great way to make sure that everyone is on the same page with the current and future plans for the business. If you’re part of a team rather than flying solo, it’s imperative that all of the team are all on the same page and agree how they’ll work together on moving the business forward. If you can’t agree on the where you’re heading then you will probably find you won’t get where you wanted to go.
6. Holds you to account
A business plan allows you to articulate your vision for your business as well as your plans to get you there. Going through the actual process of typing the words under each heading in your business plan forces you to think about creating a long term strategy for the business. Once you have answered all the questions in the business plan and laid out your timescales, it provides a simple way to track your progress and hold yourself accountable.
7. Refining your message
A business plan is a good way to describe what you do and more importantly what you do not. The very process will force you to understand who your competitors are and describe your strategy for achieving your goals. This very process will help you communicate your message to investors, employees and customers in a much more structured and effective way.
If you’re still not convinced then an American Express study, reported in Business Week back in 2008 identified:
“a number of ways to achieve business success that are directly connected to writing a business plan. For example, productivity and success are tied to using your mind’s creative process to full capacity. A business plan will force you to think in creative ways about a business that you haven’t before. A business plan also forces you to set goals and provides the tools to control the outcome. In short, it translates ideas into actions.”
So the long answer to the question “Do I really need a business plan?” is no you don’t, but your business success is more likely to be guaranteed if you have one, because the very act of writing one is more likely translate your ideas into action.
If you need help with writing a business plan or having an independent view of your business plan then let’s talk