Most business owners have a notion that a business plan is solely for fundraising events. But they couldn’t be farther from reality. Bootstrappers in particular rarely think of a business plan as being important to their business’s survival. A business plan is like the underdog sibling of a great business idea. The truth of the matter is that the importance of a business plan is undermined and this shouldn’t be the case. Every business, big or small, needs to have a plan in place because it is so much more than just a fundraising tool.
Why you need to have a business plan for your company
Gives Your Business Direction
You have a million dollar business idea. You’ve found just the team to help you get started on it too. No doubt it is exciting to immediately start working on it, but it’s always wise to hold your horses and chart out a plan. A business plan serves as a roadmap for your business’s future. You can draft your timeframes, goals and what you need to be working towards to realise your business vision. Every time you feel like you’re losing track, just take a look at your business plan to help put things into perspective.
Makes You Take A Closer Look At All Aspects
A business plan helps you be thorough with the main aspects of your business and iron out any kinks you find. By going over and researching everything to do with the business you are forced to think hard about important factors such as equipment, pricing, licensing, facilities, etc. Remember to also make a cash flow forecast so that you know what to expect in terms of money. It’s always better to overestimate expenses than underestimate so that it doesn’t throw you completely off-track.
Makes You Accountable
By making a business plan you track your own progress even if life gets in the way. Not all entrepreneurs can afford to quit their regular jobs to focus full-time on their business ideas. Most of us have regular 9-5 jobs after which we devote time to our business till it actually kicks off and begins reaping profits. During all this hullaballoo it is only natural to leave your business idea on the back-burner and before you know it, you’re off by many months and eventually feel discouraged to work on your business. To avoid this, set tangible timeframes and goals that are achievable and review them from time-to-time to not lose track.
Helps With Funding
This is the most common reason why many business owners or entrepreneurs create a business plan in the first place. Any investor or VC you approach for funding will ask for your business plan first before they listen to your pitch. Why? Because it shows that you’ve thought it through, that you’re dedicated to making it succeed and that there is a real need for your product or service in the market.
Tip: Use data and numbers where possible. Cold hard facts such as market research, cash flow forecasts, and early orders make more of an impact than random statements.
Gets You Ready With Plan B
Sure, nobody wants to think of their business failing, but it’s important to have a backup plan in place. Building a business from scratch only to see it fail is not something anybody wants to see. So, what is your best chance to save your dream project? Have you thought of an alternative income to keep your business running for a bit till it picks up again? Plan ahead and have a contingency plan as a backup in case the worst happens.
Don’t just think of a business plan as a fundraising tool. It is important to plan out your business to ensure your company’s success.
This is Part 1 of our two-part series on Business Plans. Stay tuned for our next post on How To Write An Effective Business Plan For Your Small Business!