Writing a business plan is an important aspect of any business, from multinational corporations to the individual/sole proprietor. Many entrepreneurs mistakenly believe that business plans are only for large companies. The truth is that a business plan is a core piece of material that you need in order to help you stay focused and execute all of the things you’ll need to do to have a successful small business. Here are five of the biggest reasons that you need to write a business plan.
1. To Find Potential
A business plan includes a deep dive into the state of the market you’re in (or entering) and exactly how your company will position itself within that market. Writing a business plan gives you a better idea how sustainable your idea is and whether or not your small business might succeed in the current market environment. If you haven’t taken the time to laser focus these insights, you might put a lot of time and money into an idea that simply won’t pan out. Writing a business plan is an easy way to avoid this.
2. To Attract Investors
It will be very difficult to find an investor or to qualify for a business loan for your small business without a comprehensive business plan. An investor will need to see that you have done your research, understand the market, have a clear plan for how the business will operate, and what core values the company will strive to hold. All of this information can be found in a business plan.
In 32 Ways To Be A Champion In Business, Magic Johnson wrote about the people who would come to him with ideas for startup businesses. Ideas seemed to be plentiful, but not many people came with a plan to execute their great idea. Investors want to be a part of something great, and the best way to demonstrate how amazing your idea is is through a well-written business plan.
3. Understanding Your Goals
Is your idea scalable? What are your goals for where you’d like your business to go? A very large percentage of small businesses fail within three years of opening shop. One important reason that this happens is that the owner didn’t really understand what he or she wanted the business to accomplish. If you aren’t sure what problems you are going to be solving for a customer, it’s hard to focus marketing efforts and find people who will become attached to your services. Writing a business plan guides you through considering scenarios and figuring out exactly what you’d like to achieve through your business.
4. Measuring Progress and Having Accountability
Business plans lay out metrics for how progress will be assessed and what exact goals a small business has. As time passes, it’s important to be able to come back to those metrics to measure how much progress you’ve made versus how much progress you had planned to make. Writing a business plan also gives you a measure of accountability because you have committed to the steps your business will be taking, making it easier to assess whether you have been successful or not over a period of time.
5. Information Is Critical
Keeping your business plan up to date means that you consistently have access to the hard numbers you need to measure return on investment and make important business decisions. Knowing your numbers means being able to make informed decisions quickly and adapt to fast-moving markets.
It’s Not As Hard As You Think
Writing a business plan might seem intimidating, but your first draft doesn’t have to be complicated. Your business plan will grow and change as your company does, so unless you are pitching to investors, you don’t have to stress about how perfect your business plan is. The more important thing is to remember to update your business plan regularly and set aside the time you need to add as much information as you can.