Recently someone asked me why they needed a business plan if they were doing alright in the business. It sounded to me as if they were thinking of a business plan as just a fund-raising tool or a trouble shooting exercise.
In fact, a business plan is much more than that: It’s a tool for understanding true potential of your business. You can use it to monitor progress, hold yourself accountable and manage the business’s growth. And of course, it’s a marketing and hiring tool for attracting key employees, suppliers or future investors.
If you needed to go out of London and get somewhere, you wouldn’t just start driving in one direction. Building a business without a plan is just as foolish. A simple SatNav, also needs at least 3 things to work, knowing where you are going, where you are now and what best route to take. Moreover business isn’t static. We often make the mistake of thinking of a business plan as a single document that you just put together when you’re first starting out and then set aside. Something to check off the to-do list and be done with.
Here are 7 good reasons, why you should write a business plan and update it regularly.
Design and Improve Business Model: Understanding various product lines, pricing, volumes of sale, costs and discounting will not only help you make more money, but also help you adapt to changing market and competition.
Alignment of key shareholders, owners, family members and management team: It will allow everyone to work towards clearly defined common goal and reduce conflicts.
Focus: Laser focus for your entire team as you are working on the future and not just putting out fires.
Attract: A good business plan will help you hire for your future business – not your current business. It will help you plan when and who to hire. It will attract higher grade employees or suppliers as they would be inspired by the vision and future growth.
Capitalise or Funding: If you are looking for funding or investors to grow your business, a good business plan will outline the business’s potential to make money or give return on investment. By putting statistics, facts, figures and detailed plans in writing, a business has a better chance of attracting investors to provide the capital needed for getting started.
Business Growth: Grow the business larger than what it is today and what it would be if you were just dealing with daily fire-fighting. Establish strategy and allocate resources according to strategic priority.
Selling or Exiting: The business plan is a very important part of selling the business. It help buyers understand what you have, what it’s worth and why they want it. You can’t expect to get true worth of the business without having a business plan which explains the future earning potential of the business.
A business plan is not a document you create once and store in your bottom drawer. It’s a living guide that you should develop as your business grows and changes. Successful businesses review and update their business plan when circumstances change. If you have a team in your business, holding brainstorming sessions is a good way to benefit from their knowledge – it ensures you’re all on the same page and that you get their support.