I’ve had a few people ask me recently, “just why is it so important to have a business plan?”
Well, a business plan serves two crucial core purposes; it provides a financial validation and it also serves as a roadmap to keep you on track all year.
By financial validation, I mean that your plan gives both you and any outside funding institution you may need for loans etc. a strong indication as to whether your business venture will be a success. If you are doing a business plan for this purpose you would add in specific detail regarding how you run your business and whether you will get a return on any investment that, say a bank, will loan you and of course that you are financially viable enough to be able to afford loan repayments.
The second core purpose, the roadmap, is the area I will be looking at in more detail as this is what most small businesses (who don’t necessarily need financial input) think that a plan is not a necessity. And some small businesses manage completely fine without a plan, but I feel it is important as it lays out your action plan; details all the milestones and successes you have established and gives timescales for when you expect to complete certain tasks. It gives you a clear path to follow and keeps you focussed on achieving the goals that you have set for your business.
So, I’m going to focus on what a business plan does for your business and why it’s important.
To demonstrate that you’re serious about your business. This just puts it down in writing that you are committed to building your business and how you’re going to go about making it a success.
To ascertain your business goals or milestones. Your business plan will make you think about what you want to achieve with your business and where you see yourself in a year’s time… in five years’ time or more. You can plan not only your long-term goals, but also some quick wins and short term plans. They are significant events that you want to achieve, such as building a website, launching new products/services, producing a brochure and also things like getting your first 100 or 1000 followers on social media.
To understand and know your competition. A business plan forces you to look at your competition – analyse how they work, what they do that makes them stand out in the crowd, look at their products and how they advertise them, package them etc.
To understand and know your customers. Planning makes you look at your customers; who are they? Why do they buy your products and why do they buy when they do? Do they belong to an average age group or geographic region? An in-depth customer analysis will help you understand what makes your customers tick and how you can better serve them and give them what they want.
To assess the feasibility of your business. Is your business viable? A feasibility study involves researching your target market and your competitors and will let you know if your business venture is likely to be a success.
To determine your financial needs. Do you need to raise money to buy stock and how are you going to do this? Are there training opportunities for you, so you can learn more about what you do, that incur a cost? How will you factor this in? If you need a big financial injection, you will need to look at loans or investors…your plan will then need to be very specific around how you will be able to afford this kind of investment and what your return will be.
To reduce the risk of looking at the wrong business opportunity. If you do all your research, you will be able to clearly see if a particular business opportunity is going to be feasible, if there is a market for your products/services or whether an alternative route/opportunity might be better for you.
To push you to research your market and really get to know it. Researching your market will help you understand the latest trends in your particular area. Is this market growing or receding? What is the biggest threat to your business/industry? What is the size of your target market and how do you get your products/services in front of them? Your business plan will help you gain a greater understanding of the ‘what, when, where, who and how’ of what your business will face.
To pinpoint your brand. Creating a business plan makes you focus on what your brand is; helps you describe your business succinctly and decide how you will position your brand to your customers and target market.
To measure the success of your business. This is the bit that most of us forget about when running a business. It’s important to have measures in place so you know if a particular product or strategy is working. It gives you the option to change your strategy or break it down to make it easier to manage. By writing down the goals you want to achieve, you can look at them every month or quarter to see how you are doing against what you wanted to achieve at the beginning of the year…and adjust things accordingly – this might include removing certain goals, changing them or adding new ones. But if you don’t measure, you don’t know!
Your business plan is about what you want to do. It’s always a work in progress and once you have one and use it, you will wonder why you didn’t do it before!
Find out more about what to include in your business plan in more depth and how to do it …10 essential tips in making a good business plan
And click on this link for your free basic business plan template/instructions Business Plan
If you need any help or advice, please feel free to get in touch.
choosing your products or services?
– Look at premises you currently work from (it might just be from home). What will you do if your business expands – what premises will you need to ensure your business succeeds?
– Are you likely to have cash flow problem – if so, how will you deal with it?
necessary.
The Write Way 