Do I Need a Business Plan?
Whether it’s a service-based business or product-based; whether you plan to be an online entity, or you plan on establishing a brick-and-mortar shop, every person planning to start a business needs to begin with the business plan.
A business plan is an important step in establishing your business, but why is it so important?
To answer this question, you first need to know what a business plan is, and just as importantly, what it is not.
A business plan is:
- A written outline of the business
- Stated goals and objectives
- A strategy to achieve these goals
A business plan is not:
- A guarantee of success
- A final say on the business goals
Keep in mind when writing a business plan that goals and strategies can change as you go along; in fact, they should. Also, while the plan helps you evaluate risks, you cannot plan for every risk imaginable. Don’t try to do more with your business plan than it is meant to do.
And, while you may have a great business plan, and a great product or service, this will not guarantee success. Done well, it will bring you one step closer however.
With those warnings out of the way, let’s get into why a business plan is an important tool in getting your business going.
It Helps You Establish and Clarify Goals
To start a business, you need a goal or set of goals.
What do you hope to do with your business?
If you are offering a service:
- how will that service benefit your customers?
- What problem are you solving?
- How will you distinguish yourself from others offering the same service?
- Why would anyone want to use your service?
Notice: The question is why anyone would want, not need your service. Your service may be useful, but you want to understand how you go beyond the needs of your customers and get to their desires. What makes this the best pick for the specific need? What is shiny and exciting about it?
If you are offering a product:
- what problem does it solve?
- What would make your customer want to pick that up over another similar product?
- What makes your product unique?
With any type of business, you want to answer the question: What does success look like for me?
By creating a business plan, and stating the goals for your company, you are attempting to answer these questions. It is the same as any type of goal setting: What is the goal? How do I know I have succeeded in reaching that goal?
With a business plan, you want to be as specific and concise as possible with these goals. Part of the business plan is a mission statement- this is where you will point to the ultimate goal of your company or brand.
The great thing about clarifying your goals is it gives you a way to evaluate your business. Having the goals stated clearly allows you to check your business’ success and allows you to re-evaluate those goals as you go along.
Note: *Just because you state a goal at the beginning doesn’t mean things won’t change. Be ready to accept new goals and adjust previously stated ones*.
It Allows You to Evaluate Possibilities and Risks
Risk is inherent with any new venture. By creating a business plan, you are taking the time to think through the possible risks before you sink your time and money into something new.
This includes financial stability. No one wants to start a business they will not be able to financially maintain.
Think about it:
would it be better to jump into something without having considered the obstacles that may come up, and then find you are unable to overcome those obstacles?
Would it be better to have sat down, thought about the obvious risks inherent to your business idea, and decided on courses of action that could be taken if those obstacles come up?
While the idea of writing a business plan may sound boring and time consuming to some, think of how much more of a time waster it would be to discover something you have been working on for six-months is not able to proceed because of some new hurdle. Especially if that hurdle could have been foreseen with a little extra time in planning at the beginning.
Your plan can also help you evaluate the possibilities of growth for your company. Take time to think about places you could expand in the future and add to your dream. This doesn’t mean you have to pursue all those possibilities, but it’s good to know where you can go with your ideas.
Note: *While risk evaluation is important and helpful, you should remember that you are not going to be able to account for every possible risk. Leave some leeway in your plan for the unexpected*.
It Helps You Create a Marketing Plan
Once you have an idea of your goals and your financial situation, you will be able to get a better grasp on your marketing plan.
Every business needs to have a marketing plan, whether it’s social media advertising, email blasts, or snail mail promotions, just to name a few possibilities.
When you understand the goals of your business, you can understand the best way to market to potential customers.
Part of the planning process is to clarify who your target customer is. This will also help you make these marketing decisions. Understanding your target audience will help you understand the best ways to reach them.
Your plan also helps you evaluate how your product or service touches on the wants of your customer, which is an important aspect of marketing.
Plus, by taking the time to get a firmer grasp on your financial situation, you will know what type of marketing strategy you can afford.
Note: *Marketing can be a lot of fun, but only if you have taken the time to plan and understand your marketing needs*.
It Gives You a Presentation Tool
As you progress from planning to enacting, you are going to find a need to approach possible partners, financiers, suppliers, etc. If you have a business plan in place, you will have a useful presentation tool to get these people on board.
Depending on your business model, you may find yourself in need of investors. Which situation do you think these investors are more likely to respond to?:
- You walk into a meeting with them, business plan in hand. You have clearly stated goals, a set strategy to meet these goals, clauses in place to deal with possible risks, and a projected date of when you will start turning a profit.
- You meet with someone, excited about your idea. When they start asking you specific questions about your goals, you keep presenting them with the idea, but have no way to clarify. You’re not willing to accept the possibility of obstacles, you just believe it will work.
Well, which one would you respond to if someone was asking you for money?
The same idea goes for possible partners or suppliers. If someone is going to do business with you, they are going to want to see possible rewards.
By being prepared, you can get more people willing to trust you and work with you.
It Gives You the Push You Need to Go from Idea to Execution
This will, first of all, help you determine if your idea is sound.
If you sit down to start creating goals for your idea and find that you are unable to create realistic plans, or that you don’t have the means to bring those plans into action, you will be able to walk away from it, at least for the time being, without sinking more time and money into it.
If you can get a vision for your business idea however, and you have taken the time to write it out and start making concrete plans, you are more likely to execute that plan. Once you start planning you will take yourself more seriously, just like others will take you more seriously.
After all, who wants to go through all the trouble of writing a business plan if they aren’t going to do anything with it?
If you are ready to go from idea to execution, you need to start the planning process.
Don’t let the idea of planning become daunting. It may look like a pain, but it actually saves a lot of pain further down the road.
If you are unsure how to start, no worries: stay tuned for my step-by-step process that will take you through what you need to include.
Did I miss any benefits of a business plan? Let me know in the comments.