As we guide clients through the 5 Steps to Successful Self-Employment or 10 Steps to Venture Success, we are frequently asked the question, “Do I really need to create a business plan?” The answer is and always will be YES! We said it in our article Fact or Fiction: Small Business Edition and we will say it again – your business plan is a vital step in creating a new business. Here are a seven important reasons why
- Validates your business idea
Something may sound like a great idea, but writing it out on paper forces you to really think about it. This process may help you feel more confident about your idea, or it will point out major flaws that should be addressed before you invest time and money into any business.
- Clarifies your goals
It’s not uncommon for someone to have multiple ideas of what they want to accomplish with a business. However, sometimes these ideas overlap or even contradict each other. A business plan will help you create clear, consistent goals.
- Creates a road map
Not only does a plan help you identify what your goals are, it also helps you determine how you are going to reach them. You can identify opportunities and challenges before you come face to face with them, so that you are better prepared.
- Specifies your market
Many lack when it comes to knowledge about the market they wish to operate in. If you want to succeed, you need to know who your customers are, who your competition is, and what makes your business competitive.
- Lays out financial facts
As your plan asks you to layout your pricing, expenses, sales goals, and other factors, it quickly becomes clear whether or not your business idea is financially viable. You may wish to offer the lowest prices in the market, but if the numbers don’t line up, your business will struggle and possibly fail.
- Benchmarks for tracking progress
After you launch and your business begins to grow, you need to track your progress. However, these numbers mean very little if you have nothing to track from. Your plan gives you a benchmark to track your progress by comparing what actually happened with what you expected.
- Gives lenders confidence
Finding adequate, affordable financing is a challenge for many first time small business owners, especially since there is no real proof that your idea is worth the risk. Your business plan shows lenders that you are serious, and it gives them something to measure to determine the risk of backing your business
Your business plan is not a set-in-stone rule book for how things should go in your business. New opportunities and challenges will arise as time goes on, and your plan will need to adjust to them. Use your plan as a guide to help you reach your goals tomorrow, 6 months from now, and many years into the future.