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5 reasons why you need you to plan

Written by: Mark Gwilliam

Article Overview: A sound, well thought through, business plan is the cornerstone of any business…whether is it a start-up, growth or established business…as well as being a significant tool for monitoring the progress and growth of your company. Most people would not embark on a long journey to somewhere they have never been without finding out how to get there first. A business plan is effectively this road-map for your business. This article outlines 5 key reasons why you should have a business plan.

5 reasons why you need you to plan

A sound, well thought through, business plan is the cornerstone of any business…whether is it a start-up, growth or established business…as well as being a significant tool for monitoring the progress and growth of your company.

Most people would not embark on a long journey to somewhere they have never been without finding out how to get there first. A business plan is effectively this road-map for your business. This article outlines 5 key reasons why you should have a business plan.

1. To establish if your business idea(s) will work

Writing a business plan is a good way to test whether your ideas are feasible, and is, in a sense, your safety net. Writing a business plan can save you a great deal of time and money, if working through it reveals that your business idea is unsustainable or commercially unviable.

Often, an idea for starting a business is discarded at the marketing analysis or competitive analysis stage, freeing you to move on to a new (and better) idea.

A thorough review of opportunities and threats that may affect the business (competition, the economy, technology, etc) and also its internal strengths and weaknesses (skills, experience, goodwill, etc) will identify the direction and choices that should be taken or avoided.

2. To give your business the best possible chance of success

Writing a business plan should ensure that you pay attention to both the broad operational and financial objectives of your business and the details, such as budgeting and market planning.

Taking time to work through the process of writing a business plan will facilitate a smoother start-up period and fewer unforeseen problems as your business moves through its lifecycle. A plan will provide an overview of all aspects of the business and you will be able to detail the: who, what, where, when, and why of your day-to-day business operations, costs, and projected profitability.

By forecasting where your business will be in six months, one year, or five years, you are not only letting potential investors know your plans, but also setting up realistic milestones for yourself and your employees.

3. To secure funding/ attract investors

The process of writing a business plan will force you to analyse your business’ financial needs. You may require both operating and start-up capital to start a new business venture or to finance your growth. You will significantly reduce the chance of an established financial
institution lending you money without a well developed business plan, as it is generally a minimum requirement.

Established businesses often need money, too, to do things such as buy new equipment or property, or because of market downturns. Whether you want to approach a bank for a loan or attract financial investors, having a business plan gives you a much better chance of getting the money you need. An enthusiastic and motivated “sales-pitch” may stimulate some interest, but they'll need a well-written document they can take away and study before they'll be prepared to make any financial commitment.

Be prepared for your business plan to be scrutinised by potential investors - they may want to undertake extensive background checks and competitive analysis to be certain that what's written in your business plan is indeed the case.

Before investors can decide whether or not to back your business financially, they will need to know as much as possible about how the business will operate and how their investment will be spent. Your business plan can demonstrate that you have met goals and illustrate the business’ growth and need for additional funding.

4. To provide a tool to help you manage and monitor your business

A business plan is essential for start-up businesses…but it's also an important tool for established businesses. Viable businesses are dynamic; they change and grow. The company's original business plan needs to be revised as new goals are set. Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company's growth should take. A business plan should serve as an ongoing business tool that you can use to monitor your progress.

5. To develop contingency and risk management plans

No matter what business you are in, there will always be exposure to some sort of business risk. A thorough analysis of the business, via the planning process, may identify areas that should be managed pro-actively rather than waiting for the event to happen. Examples may include: being over-reliant on one customer, losing key data because your IT systems are not protected properly, etc.

Knowing that these risks exist will provide an opportunity to address them before it’s too late & prevention is likely to be cheaper than the remedy.
Conclusion

Writing a business plan needn’t be a daunting task. Taking time to prepare your business plan will significantly enhance it. Before you leap into developing one, ask yourself why are you preparing it: is it to raise finance or to help you manage and guide your business? The answer will help you focus your attention and clearly define your audience’s needs.

List your goals and compile a list or library of research materials you will use. Poor out of date and inaccurate research will not win too many favours with your readers.

Start compiling your entire key financial documents (financial statements, budgets, etc). Make sure that they are realistic as investors or financial institutions will expect you to support your projections with assumptions.

Consider starting with a contents list…this will enable you to divide activities into smaller, more manageable tasks. When you’re ready, start your business plan, expecting it to change as you become more confident and you better understand your business. It should be a work in progress document and may take several drafts before you are happy.

Finally, good luck, and I am sure that you will find that your investment of your time and effort will be well rewarded.

Further help and articles on running a small business can be found at www.mark-gwilliam.com

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Article Tags: business idea, business plan



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Re: True Characteristics of an Entrepreneur - [quote="BuzzAroundBooks":sl9904z9] I think there are a lot of quizzes out there which people can take to evaluate themselves, but the problem is that people generally don't objectively answer the questions. And if you take a college course on entrepreneurship, you really won't know if you're cut out for that lifestyle change until you're actually doing it. In class, writing up a full business/marketing plan and presenting it to your classmates doesn't mean anything (or prove that you got what it takes to succeed at running your own small business). For instance, in an eMarketing class I took, the instructor gave me an "A+" on my business plan, but when I asked for additional feedback when the course was over... he gave me his "real" thoughts and said the idea would never "swim" in reality.[/quote:sl9904z9] Very true - a brutally honest answer to the questions is necessary to get a real answer. I've known plenty of people who could pass a test on a topic, but that did not mean they could implement the things they learned. Did he give you any reasons why it wouldn't work? What I'm thinking is - what information in the business plan should have revealed it wasn't feasible? If that element wasn't in the business plan - it should be added. Analyzing the plan, the location, the target market, market research, needed expertise, people to fill those needs, financial projections and needs and so on should reveal problem areas in a plan. Shri
Re: Why Your Business' Website Is Not Making You Money - Thanks for sharing your insights and I agree with you. In many cases people dont have any plan and lack of appropriate knowledge about quality content,keyword research,building quality backlinks also are those primary reasons behind their failure to make money with their sites.
Re: Is A Business Plan A Waste Of Time? - We should have a poll here - who has a business plan and who doesn't. I think I contributed to this thread when it first started, but I agree with our recent contributors to the thread. A Business plan is simply a must. If you fail to plan... you plan to fail.
Starting a New Business - Congratulations on the first step of deciding to create your own business. First, you have to ascertain if you are going to be selling your products or services to people or to businesses. People purchase products and services for three basic reasons: •To satisfy basic needs •To solve problems •To make themselves feel good. You have to determine which of these three categories your product or service is the solution to. Businesses, unlike individuals, buy products and services for three reasons as well: •To increase revenues •To maintain the status quo •To decrease expenses. Knowing the reasons why people/businesses buy, you should have a picture emerging of who you think your "Target Market" (or ideal customer) is. Once you have zeroed in on your solution, you are ready to create your Marketing Strategy. If you look at any company that has grown rapidly over the past few years, (i.e. WestJet and Starbucks), it should demonstrate to you the importance of Marketing. In simple terms these companies have: •Clearly defined what makes them different; •Who their ideal customer is; •How to reach them; •Why customers should buy from them; •And most importantly why customers should come back again. It is strong Marketing Awareness that singles out the best companies. I can not stress enough how important it is to create a "living" Marketing Plan before you even start. I hope this helps a little in the creation of your plan. All the very best of luck. Remember: "A Goal without a Plan is just a Wish" Miles of Smiles, Marketing Maven
Re: Is A Business Plan A Waste Of Time? - also, it's one thing to "have" a business plan but if you don't "follow" the plan or "review" the plan atleast once a quarter is it really worth going through the trouble of creating one?? I say Yes because it get's you thinking about your business and subconsciously you will stick close to the plan but I'm also inclined to say no because I have spoken to a few people that create one and a year or two later have no idea what they had written in it.


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