Why is a Business Plan Important?
Nearly all business experts agree on one thing: the importance of drafting a business plan. Yet plenty of companies plunge into the competitive arena without a formal plan. Why? We’ve heard plenty of excuses posing as reasons.
A lot of new businesses are carried away and figure their passion and optimism are enough to build a successful company. Others say they were just too busy to develop a formal business plan. But operating without a plan can prove even more time-consuming in the long run.
The benefits of having a business plan
The time you invest in your business plan will pay off many times over. Some of the most obvious benefits you can gain from business planning include
An opportunity to test out a new idea to see if it holds real promise of success
A clear statement of your business mission and vision
A set of values that can help you steer your business through times of trouble
A blueprint you can use to focus your energy and keep your company on track
Benchmarks you can use to track your performance and make midcourse corrections
A clear-eyed analysis of your industry, including opportunities and threats
A portrait of your potential customers and their buying behaviors
A rundown of your major competitors and your strategies for facing them
An honest assessment of your company’s strengths and weaknesses
A roadmap and timetable for achieving your goals and objectives
A description of the products and services you offer
An explanation of your marketing strategies
An analysis of your revenues, costs, and projected profits
A description of your business model, or how you plan to make money and stay in business
An action plan that anticipates potential detours or hurdles you may encounter
A handbook for new employees describing who you are and what your company is all about
A résumé you can use to introduce your business to suppliers, vendors, lenders, and others
What can go wrong without a business plan
The many benefits of having a business plan should be enough to convince you. But in case you’re still wavering, consider what can go wrong if you don’t take time to plan. You risk
Running out of cash before you open your doors because you haven’t anticipated your start-up costs
Missing sales projections because you don’t really know who your customers are and what they want
Losing customers because your quality or service falls short
Becoming overwhelmed by too many options because you never took the time to focus on a mission and vision for your company
Going bankrupt because you don’t have a rational business model or a plan for how to make money
Take our word for it: Time spent putting together a solid business plan is time well spent. In fact, the more time you spend, the better prepared you’ll be. But don’t be overwhelmed at the prospect. The basic components of a business plan are fairly simple.