Some people say the moment your business plan is ready for the printer, the plan is already out-of-date. For some entrepreneurs, the business plan is an outmoded document mainly created for the benefit of fund providers like banks and investors. These assertions are not always right.
A roadmap for even the smallest or earliest-stage idea can foster alignment, carve a path for the business and even help you craft your brand messaging. The fact is that a business plan — even just a one-page with a few financial projections — can be a valuable internal tool and for external business relations. Here are 10 good reasons why you need a business plan
- Understand Your Market
The business plan usually has a whole chapter dedicated to the market in which your business intends to play in or is playing in. The market valuation, segments, demand drivers, critical factors that impact the market, and as such helps you determine your segmentation lines and target market and develop your entry and growth strategies. It also contributes to your pricing and brand message.
- Confirm the figures
This piece clearly highlights why you should have a business plan before you even take the first step: “A lot of ideas sound great on paper and even in discussions. However, simple math can make or break an idea. Before we launch any new idea, we at least create a financial model to project the ROI from several realistic scenarios. You can save a lot of time and frustration thinking through the numbers, and making sure it’s possible to hit your revenue and profit goals.” ~ Phil Frost, Main Street ROI
- Establish Benchmarks
Charles Bogoian, of Kenai Sports, LLC puts it in simple language. “Business plans are a valuable, iterative, document that can serve as a successful benchmarking tool. Where did your business exceed expectations? In what areas did your strategy fall short? While it’s fine to “pivot” your company based on what you’ve seen in the market, having something in writing puts the onus on you to be honest about your company’s performance”.
A business plan provides details of what is expected of the organisation; its goals and strategies. It keeps the business organized and focused on its primary responsibilities so it does not veer off to attracting yet misleading paths.
- Dealing with Professionals
Professional service providers like accountants, lawyers and consultants would see the bigger picture and the path your business wants to take if you share your business plan with them. This helps them to provide services best suited for business and achievements of its short-term and long term goals.
- Setting Specific Goals
Business plans contain long-term goals for your business. They provide a basis for you to set goals (both long term and short term) for your managers who in turn break them down into specific tasks for their team members. This helps align all organizational tasks and activities with the core business and goals.
- Hire and Fire staff
The business plan as a document is the blueprint of many organisations. It lets you know who to hire for each department or unit of your business. Competent staffing is one of the most important ingredients of successful businesses. But to get competent staff, you must first know what roles are to occupied and what is required of these roles.
- Sell Your Business
The financial projections in your business plan provide an input into the valuation of your business for potential sale. It also provides several other information required by a potential buyer to make a good investment decision. Goals and strategies, risks, staffing and operations are among information contained in the plan. Investors all over the world would like to see sufficient information before they give you a few bucks. If you have a business plan, it makes your quest even easier and communicates your seriousness as well.
- Back up a Loan Application
Like investors, lenders (banks and other lenders) also require your business plan. Lenders want to see your plan for the business for which you are seeking funding. They expect the plan to cover all important areas such as cashflow projections.
- Grow Your Business
A business plan sets the tone for business growth. Often, start-ups without plan fail. A plan commits you to a path that leads to the achievement of your written goals. It minimizes the distractions and focuses energy on the ball. It attracts strategic partnerships that you need to grow you business. It establishes strategy and allocate resources according to strategic priority.
Whether you are a start-up or decade old business, you still need a business plan for the years ahead of you.