Making a business plan is one of the most important and most neglected tasks in starting a business. I will share with you seven key reasons why making a business plan is key to your success.
It is important to create a business plan
This may seem like the worst time ever to start your own business, but it all depends on how you approach it.
If you know what you are doing, you have a great idea, you have taken all the risks into account and have planned on ways of dealing with them, then starting your business when the economy is in such bad shape may present opportunities not otherwise available to those who start businesses when times are good.
But let me make it clear, whenever you start a business, it’s never going to be easy. You need guts, passion, perseverance and some luck. I have found that if you possess the first three, the fourth usually finds its way to you. Everything begins with your business plan.
Why you need a business plan
You wouldn’t be thinking of starting a business if you didn’t know what you are doing, right? Well, maybe. The problem is that there are so many issues involved that it’s easy to overlook something unless you have spent time getting everything down in black and white. Here are seven reasons (there are many more) why you need to make a business plan:
- When making a business plan you define your objective. What are you trying to achieve, and by when? Once you get started in the process of setting up a business, it’s easy to get so caught up in the routine and daily headaches that you tend to lose sight of the big picture of why you started and where you want to go. I have come across many cases of people who started doing well and got so caught up in it, they forgot how much better they could have done.
- You are making a business plan to create targets and milestones to measure your progress. Without this, after 11 months of your 12 month plan, you may find yourself far from where you should be, with no time left to make up the shortfall.
- Getting your plan down in black and white, will allow you to test its viability and the more detailed it is the more potential problems that you can plan for. And if the plan shows fatal flaws, you can give it up without any serious loss and switch to something else. Of course, to do this well you have to be ruthless and never sugar coat anything.
- Knowing where you will need to focus your attention and when, will allow you to plan out your time most effectively. One of the biggest causes of businesses failing is that the owners have tried to do too much at one time, and so have made a mess of what they could easily succeeded at if they had planned.
- Similarly you make a business plan to understand your resource allocation. The business plan will tell you how much money you will need, and when you will need it, so you can plan in advance but use resources only when you need them. If your business plan shows you will need money in 5 months, there’s no point in taking a loan now and paying interest needlessly.
- If you need bank financing, only a detailed complete business plan will get it for you. The more detailed and well thought out it is, the better your chances of getting the financing.
- If you need people to invest in your business, the same logic applies. The only reason for people to risk their money on you is if your business plan convinces them that you will succeed.
Making a business plan takes time, attention to details and the ability to deal with facts, not simply hope or pie in the sky dreams.
Your business plan must be based on the fact that times are bad at present, and while you hope that things will improve in the future, you must have a conservative plan.
Making a business plan is vital to the success of your new business venture. Check out my article on the big picture issues in preparing a business plan and a list of things to do and not do when making your business plan format.
Go here for an article that goes into detail on writing a simple business plan.