Every Business, in theory, should have a plan. The Small Business Administration even has a guide on how to write one. Yet, most entrepreneurial types I know find themselves almost accidentally in business, or dreaming up new, profitable ventures, but never go through the steps to write a business plan, thinking it is an unnecessary formality. Is it?
My Reasons why a business plan a good idea:
1. By going through the process of writing a business plan, you learn more about your idea. As you start to flesh out ideas into businesses, you need to have an objective sense of what’s great about your idea, and also what might not be so hot. Most business plans “prototypes” ask you to put out a mission statement, identify principal players and their duties, ideas about the product or services to be offered, and perhaps some plans regarding growth. It seems to me that if you have no idea about any of these things or how you would solve these challenges, perhaps you might want to rethink your business idea.
2. Analysis of Competition. Further, business plans also ask you to do some market research, and find out if others out there will be competing against you in your niche. For any business, it’s vital to know who your competition is, and their strengths and weaknesses, as well as how you differentiate yourself from the pack. I had a friend who thought he had a “for sure” business venture and saw it fall flat on its face, because he didn’t understand the competition or marketplace well enough, and ended up losing a substantial sum of money and time as a result.
3. If you can’t articulate what your business is about, how are you going to sell it to others? We talk about the elevator pitch, honing your ideas and the like all the time online- how to do a good presentation….well, if you can’t, in the privacy of your own home, articulate the ins and outs of your proposed business, how are you going to be able to do it for customers?
4. Business Plans are essentials for Loans and Funding. If you have a great idea, you might need a small business loan, or even venture capital. And people like VC angels and bankers always want to see your business plan, and know they are investing in people who have taken the time to research their business before asking others to invest. Treat yourself like a grown-up. If you have this document prepared, if you ever are fortunate enough to have someone ask “I’d love to invest in your company- what would it take?” you will have the documentation ready to go, with probably only minor tweeks needed.
5. Planning out the business means providing yourself goals and a roadmap for success. By going through the process of writing up a plan, you have a much better sense of what challenges may lie in the road, how to circumvent them, and provide yourself some realistic benchmarks for success.
So for these reasons (and a bunch more that cover the legal and paranoid side of running a business) I think going through the process of writing a business plan is more than a formality, but a step towards making your business dreams come true. If you click the link above, it will take you to the Small Business Administration Website and will give you a layout of the basic business plan and its content.