A business plan is a document that holds details about a company’s objectives and how it plans to achieve those goals. It holds the roadmap for the company’s marketing, operational and financial strategies.
Whether you’re running an established firm or starting a new company there are a few key reasons why it’s crucial to create a business plan. Helping you and your team stay on track, and securing investments are just a couple of examples of why you should write a business plan. In this article, we’ll go into detail about why you must create a business plan for your business.
What is a business plan used for?
You should be thinking about the next 3 – 5 years for your business. What are your goals? What is your business philosophy? What are the milestones for your goals? How do these milestones translate into your business’s marketing, sales, operational, and financial strategies?
- Steering your business as you start and grow: Creating a business plan will help you direct your business in the right direction as it starts to grow. Your business plan should define how you would: structure, run and grow your business. It’s a way for you to think about the details of all of the key areas of your business.
- Help you to reach business milestones: Since your business plan outlines goals and milestones for the next 3 – 5 years, the decisions you make should prioritize the steps to achieve them. Making key decisions such as securing business loans or investments will become much easier now that you and your team know exactly what you want to accomplish.
You should keep in mind that your business plan is not a comprehensive step-by-step manual. Think about the big picture, and use it as a guide for your decisions.
- Help you get funding: Creating a business plan will help your business stakeholders feel confident about partnering with your business. It’s also a tool that will help you persuade potential stakeholders that working with you and your business is a profitable decision.
What are the 3 main purposes of a business plan?
There are a lot of reasons why creating a business plan is a good idea. As previously mentioned, it provides clarity when you’re faced with big decisions and provides a clear guide on where your business is headed.
If we were to filter the myriad of reasons down to 3 main purposes of creating a business plan, it would be:
- Assess the feasibility of your business idea: Being inspired and motivated to chase a business idea is a great start. But you need to start collecting hard facts and statistics on your market so that you can define the obstacles your business may face; You need to determine if your business venture is feasible. Will you be able to make a good profit? How long will it take you to do this? Do you need a lot of capital injection? Working on your business plan will force you to think about and research these important questions.
- To provide a clear roadmap so you can focus your effort: After determining the feasibility of your idea, you need to figure out what direction you want your business to take; what are your guiding principles? What sort of work do you and your team need to focus on? These sorts of questions are what a business plan is for. Document what your business is about and what your team wants to achieve in the next 3-5 years.
- Attracting potential stakeholders: Your business plan is public knowledge. If you’ve done this right, and documented the feasibility of your venture, as well as the goals and roadmap for your business, it’s time to seek out stakeholders. If you’re looking for a team they’re going to want to know how you plan to grow and conquer the market. The same can be said for anyone who is a potential partner, especially where money is involved.
What are the benefits of a business plan?
So far, we’ve talked a lot about why you should have a business plan. To get you motivated to sit down and write a business plan, let’s talk about how it can benefit you.
Provides mental clarity
As a business owner or operator, you must have a million thoughts going through your head about what to do day-to-day, how to grow, how to optimally allocate resources, etc. Having a business plan brings you mental clarity. Since you’ve defined everything from a vision to a more specific roadmap, you’ve gained the mental space to focus on key decision-making.
Outlining your marketing strategy based on research
If you’ve followed the previous advice on how to build a business plan, you must’ve researched your market: your competitors and your target. Having this resource allows you and your team to focus on what’s important, and forget about anything that doesn’t help you achieve your goals.
If you’re wanting to attract investors or ask a bank for a loan you’re going to need concrete evidence of a business plan and the feasibility of your business venture, which I’m sure you’ve already outlined, right?
Securing talent for your business
If you’re going to grow your business, you need to be working with the best people possible. Your staff are going to want to know your vision for your business to determine if it’s worth working for you, but to also figure out how they’re going to fit into your organization.
Gives your business structure
Once you’ve completed your business plan, you’ll notice how much structure and clarity it gives your business. You now have key areas of focus, milestones for tracking progress, and a long-term vision as your north star.
Are having a business idea and a business plan the same thing?
Having the idea and desire to build a business is a great aspiration to have. However, that is far from having an actual business plan. A business plan provides you with a concrete plan of how you will build a business around your idea – you lay the foundation with your business idea, and you structure it with your business plan.
Your business idea is about what you want to do. Your business plan will go into detail about how you’re going to do it. It defines the road you’ll take, and the marketing, operational and financial steps to get there.
Your business plan will answer key questions such as: What are the moving parts required to operate your business? What are your goals? How will you be competitive in the market? What gives you the edge over your competitors?
As you’ve read, if you’ve got the determination and a good idea for a business that’s a great start. But make sure you’ve taken the time to figure out the details of how you’re going to operate and grow your business.