The business plan – a document that most business owners should develop to begin their process. Some say will say it’s a crucial piece, while others aren’t always sold on the value. Regardless, this post isn’t a debate. My opinion on the subject is that it won’t hurt your business, so I don’t see a reason not to create one. However, there are some instances where you will absolutely be required to have one. If you are starting a business I am not telling you that you NEED a business plan instead, here are reasons why you will WANT to have a business plan.
Below are 5 major reasons why a business plan is a valuable piece to have prepared in order to build and sustain a successful business.
1. A business plan gives you a starting point
There are a lot of important steps and considerations that need to be taken into account when starting and running your business. And while the decision to start a business may be the easy part, a lot of people struggle with figuring out where to go from there. The basic purpose of a business plan is to work out a snapshot of what you see your business beginning as and evolving into overtime. Treat it as an opportunity to get all of your ideas on the table and organize it how you see fit. There is no true template required, so feel free to be creative. You will also see relatively quickly which areas will work well, and which areas may need to be addressed.
2. A business plan provides direction
There are going to be times where you feel stuck. You’re not sure where to go next, or how to navigate a particular obstacle. Use your business plan to act as a guide as to where your next move will be. Finding a location, developing your website, or executing a marketing strategy are all examples of things that may be next on your list. Without a plan, you may find it particularly challenging to continue to move through the process, especially if you’ve never been there before.
3. A business plan allows you to discover your strengths while exposing weaknesses and risks
Everyone has strengths and weaknesses; therefore your business will too. Use your business plan as an exercise to discover these variables and use them to your advantage. Putting your strengths to work is self-explanatory, but I want to focus on how to handle your weaknesses. Understanding your weaknesses is just as, if not more important than knowing where your strengths lie.
Be radically honest with your own self-assessment. By doing this, you’ll be able to convert your weaknesses into a major asset. How? Simple, either develop upon or outsource your weaknesses. This will allow you to implement strategies to limit vulnerable parts of your business. Don’t allow the inner dialogue of “I’ll address this later” as that will only allow you to avoid discomfort.
Take a moment to reflect on the lesson we learned from the post “Starting a New Business: The First Steps.” Finding yourself in uncomfortable situations is a good thing, there are opportunities for growth. Tap into your discomfort early and address the areas that need attention right away.
4. A business plan is (often) required for financing purposes
If you require financing for whatever reason (leasehold improvements, equipment, building purchasing, supplies etc.), lenders will want to see some form of plan. It will show them what your business is, what their money is going to be put towards, and how they’re going to get that money back. Taking the time to be as specific and accurate as possible with the bank will make the process go more smoothly when it comes to getting your financing approved. Over the next couple of weeks I’ll outline different sources of financing and how to present the important information lenders will want to see.
TIP: If you know someone who works at a bank (preferably in commercial/business banking), or a colleague who has been through the approval process recently, have them look over your plan before you take it to the bank. They will be able to provide you with insight on anything you should change/touch up before your meetings.
Disclaimer: Having a business plan does not guarantee financing as we have learned through experience. BUT nonetheless, they are required to apply and everyone has different financial situations.
5. A business plan can help you discover if starting a business is the right path for you IN THE MOMENT
Writing a business plan may be your first glimpse at what starting and running a business may be like. Therefore, it is a great exercise to determine if starting a business really is the right thing for you. If you are having difficulties getting through this, or experiencing a lack of enjoyment while doing so, starting your own business may not be the best option for now. Of course, we change, grow, and evolve – later on you may want to give it another go. In that case, perfect, you already have some ground-work put in to add on to.
While it can be rewarding, running a business will inevitably have its challenges. Getting a feel for that early may cause you to reconsider, which is OKAY. You’re better off realizing that earlier rather than later and it will be extremely beneficial for you in your career. On the flip side, the business plan writing process may jack you up, get you excited, and make you desire more of what’s to come. In that case, awesome, keep going and see where it takes you.
One Last Thing To Leave You With
While your plan provides a starting point and direction moving forward, regardless of what type of print it is in (pencil, pen, typed), IT IS NOT SET IN STONE. If you’ve ever made plans with friends or family before, you know damn well that plans can change. Just because you may have planned X or Y, to begin with, don’t feel tied down by your original plan if something isn’t working. In fact, if this is all new to you, your plan should change as you move through the process. Always be looking for where you can improve on various aspects of your business.
All in all, a business plan is a valuable tool which will allow you to position yourself for success from the get-go!
Now that you know the WHY, we will be going into the WHAT is involved in a business plan next. For now, dream up your biggest dreams and right them down.