There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. One of the most important things you can do to increase your chances of success is to have a business plan.
A foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you to achieve important milestones and grow in the right direction.
A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses. One that business owners should revisit and update regularly.
Actually writing a business plan is often a daunting task for potential entrepreneurs. So, if you’re considering skipping the planning process here are some key reasons why you should complete a business plan.
1. Crafts a roadmap to achieve important milestones
A business plan is like a roadmap for your business. It helps you set, track and reach business milestones.
For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.
In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.
And it’s not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.
2. Sets realistic goals and objectives to assess the feasibility of your idea
Without a business plan, it’s difficult to set realistic goals and objectives for your business. This makes it almost impossible to accurately assess the feasibility of your business idea.
You need to verify:
- If there is a market for your product or service
- Who your target audience is
- How you will gain an edge over the current competition.
A business plan essentially forces you to take a step back and look at your business objectively. Which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on. Providing you with the necessary time to come up with strategies to properly address them.
3. Tracks your progress and measures success
An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.
By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.
Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.
4. Position your brand and unravel your competition
Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:
- What is your competition doing well? What are they doing poorly?
- What can you do to set yourself apart?
- What can you learn from them?
- How can you make your business stand out?
- What key business areas can you outcompete them one that gives you an edge?
- How can you identify your target market?
Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete.
5. Determines financial needs and revenue models
A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind.
Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business.
Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.
6. Documents your marketing plan
A business plan is a great way to document your marketing plan. In fact, your entire business plan can be focused on your marketing efforts. This will ensure that all of your marketing activities are aligned with your overall goals.
It should include information about your target market, your marketing strategy, and your budget as well. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc.
Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.
7. Clarifies the vision and ensures everyone is on the same page
In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed within your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there.
Additionally, your business plan is a great tool for informing your team. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.
8. Attracts investors and funding
One of the top reasons to have a business plan is to attract investors and funding.
Investors want to know that you have a solid plan in place. That your business is headed in the right direction and that there is long-term potential in your venture.
A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence in place to make that vision a reality.
Investors, partners, and creditors will want to see that you’ve put in the time and effort before offering their support. All of this makes you a more attractive investment opportunity. Which can lead to more funding down the road from both venture capitals and banks alike.
9. Futureproofs your business
Lastly, a business plan helps you to evaluate your current situation and make realistic projections for the future.
This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.
Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.
By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.
You’ll also be in a better position to seize opportunities as they arise.
Why are business plans needed?
By taking the time to create a business plan, you’re ensuring that your business is heading in the right direction and that you have a roadmap for getting there. With a well-executed business plan and processes, you’ll be able to improve your chances of success and make informed business decisions.
We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, it’s worth taking the time to create one for your own business. Luckily, it can take you as little as 30-minutes to complete a viable and useful business plan. And there are plenty of excellent planning tools out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.
Frequently Asked Questions
What is a business plan?
A business plan is a written document that describes your business, its objectives, strategies, and how you plan to achieve those goals.
It’s like a roadmap for your business – it outlines everything from who your target market is to what your revenue goals are.
A business plan is essential for any entrepreneur or small business. It not only helps you stay organized and focused, but it also serves as a tool to attract investors, partners, and customers.
Is it worth having a business plan?
A business plan is an excellent addition to your business ventures and it’s an essential piece of documentation that you need to have.
It covers everything from what the business will sell to who the target market is to what its goals and objectives are. It’s not just for big businesses – in fact, most small businesses would benefit from having one.
There are a number of reasons you need a business plan, and some of the most important ones are:
- It serves as a roadmap, outlining where you want to go and how you plan to get there.
- It forces you to think through all aspects of your business, from marketing and sales to operations and finance.
- It helps you identify potential risks and opportunities.
- It can be used as a tool to pitch to investors or lenders.
- It is a valuable resource for keeping your business on track.