Why is a Business Plan Important?
Most start-up businesses understand the importance of business planning. Without a plan, they usually can’t get funding. But even businesses with plenty of cash can get into big trouble without a well-thought-out plan.
Writing a business plan is a big task, but it is manageable. Business planning is an ongoing process for all businesses — or at least it should be. Effective planning keeps established companies on track. It serves as a guide for companies that plan to launch a new product or service or introduce a new marketing program to seize new business opportunities. A plan is also essential for companies in trouble who want to chart an effective turnaround. Even companies that are looking to go out of business need a plan if they intend to put themselves up for sale or merge with another business.
For proof that a business plan is important, consider this example. When the Kauffman Center for Entrepreneurial Leadership surveyed the annual winners of its Entrepreneur of the Year Award, it found that companies with written business plans had 50 percent greater sales growth and 12 percent higher gross profit margins than companies without plans. How’s that for incentive?
The time you invest in your business plan will pay off many times over. Some of the most obvious benefits you’ll gain from business planning include
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 road map 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
Use a form like this to establish your specific objectives for creating a business plan.