Why Should I Write a Business Plan?
Imagine you’re organising a big event like a wedding or the annual fancy dinner for your company. You wouldn’t just go with the flow, would you? Even if you don’t realise you’re doing it, you’ll end up with pieces of paper that look like an event order document. It lays out the contact details for all contractors and companies you used to help with the event (photographer, venue, music, …) and a timeline of the event. What time guests will arrive, what time the music will start playing, what time drinks will be served and what kind, and the list goes on. Even for a one-off event, you plan out every detail of it and consider all things that can go wrong and make sure you’re prepared for it.
Business plans are basically the event order document, except they are for a bigger and ongoing cause (your business) and change over time to reflect your progress, needs and market. Yet, business plans are often just thought of as this dreadful piece of document you write for a specific one-off purpose (e.g. funding) and never again look at unless there is a need for another one. If you have enough funding and your business isn’t in need of external help, then why should you write a business plan? Well, there are several reasons why writing a business plan can actually contribute to your business’s success.
Of course, one of the most obvious reasons you would write a business plan is to seek funding such as bank loans. When you’re first starting out or trying to expand your existing business, you might need some financial help to kick off your new ventures. Those who are in a position to invest in your business or give you a loan are not likely to take you or your business seriously without a well thought-out and researched business plan.
Get help for your business
Business plans can also be used when you’re trying to get some external help for your business. This help might be to rescue your business that is not doing as well as you planned, to manage a business that is experiencing a rapid growth, or to plan out the most effective way to take your business to the next level. In order to seek the right kind of help, you need to show what your business is about and where you’re trying to go.
Clarify your objectives
Writing out a business plan helps to add some clarity to what your business is doing or trying to do. You might have some grand dreams about your business but feel unsure if these dreams are achievable by your business or make sense at all. Writing everything down in one place forces you to understand exactly what your business is about and what problems it will solve, instead of jumping around in your thoughts and trying to be everything at once.
Set realistic milestones
Your business plan spells out realistic and sensible milestones and key metrics to measure your progress. Practising patience doesn’t come easily to even experienced and established business owners, and it’s especially more difficult for start-ups. You’ve got your vision and you just can’t wait to get there. By putting in place some stepping stones to get to the big mission in your business plan, you ground yourself to understand that it takes time and hard work to get to the end game.
Monitor your progress
Business plans are there to be used, not just set aside once you finish writing it. This means to look at your plan to remind yourself of the milestones and the timelines you’ve set, and to ensure that you’re following the tasks you set to achieve these goals.
Learn the industry and market
Writing a detailed and well thought-out business plan requires a lot of research. You research the target market and methods of appealing to them. You research the tools that are used by others in similar industries and learn your options in acquiring the most cost-effective and useful systems to implement in your business to set you apart. All this research you do of course doesn’t just get used to write up a fancy business plan and then abandoned. This is knowledge you gained that you can apply to your business.
Verify the figures
When you’re about to start a business or in the very initial stages of it, you tend to do a lot of calculations in your head: “So, if I earned 50 dollars from X in one week, and considering the rate at which it will grow, by the end of this year I should have raised $x in revenue.” Sure, it’s exciting to think about this, but is it actually true? And can you base your plans around this? Writing a business plan helps to verify or reconsider these figures by prompting you to project the ROI using different scenarios.
Attract the right people
When a potential employee, contractor or partner wants to understand your business, showing them your business plan can give them a clear idea of what you’re all about. It can help the prospect to decide if they are the right fit to be part of the business and where it’s headed. It can also help in deciding whether or not your objectives are aligned. Plus, being able to show your progress so far in accordance with the milestones you’ve set out will emphasise your business’s development and momentum.
Hold yourself accountable
Setting realistic milestones, putting in financial models to project the ROI, attracting the right kind of people to your business, and monitoring and reviewing your progress all mean that you’re involved every step of the way and moving forward alongside your business. Writing a business plan helps to keep yourself in check and make sure that you’re doing everything to follow that plan. At the end of the day, this is your business and your goals that are on the line.
Writing a business plan doesn’t just have to be to get funding. You can write one just for yourself in order to keep your ideas in one place, and you can review and edit your business plan on a regular basis to change components based on changed circumstances or goals. Business plans are an essential exercise for most if not all people who are starting or running a business.
Check out our quiz to test what you learnt in this article! What are the biggest reasons writing a business plan is good for your business? When you’re ready, move onto the next articles in the ‘Business Plan Series’. Learn what’s included in a business plan, who should write it, who will read it and how often you should review it.