10 reasons why you need to prepare and implement a business plan:
All too often I see business plans that are focussed on business growth and marketing. However, this is only part of your overall plan, and sometimes a very small part! The reason that this happens though is that it is easy for smooth talking consultants to make the process “sexy” by talking up the marketing plans; but it is also near impossible to hold them accountable for the plan failing.
I believe that the plan, and the team preparing it, needs to be accountable. The plan needs to be very clear on the steps required and the outcomes expected so that you can constantly measure your progress and keep revising where required.
At the end of every month, quarter, year, you should be able to measure each outcome you planned to achieve against your actual results. A well thought out plan should not leave you surprised about your results but should align to reinforce that your plan was spot on!
“In my business, I build a new plan for the beginning of each financial year. I then split that plan up into financial and other milestones spread out over the year. Each month I review my actual results against the plan and ensure that I keep up.
So, for example, if my plan requires that I complete a re-branding exercise by mid-September, I will put in time during July and August to ensure I meet the target, and this will be driven by the requirements of my plan.”
To assess the feasibility of your venture. How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. If things don’t add up you are better off working it out now rather than after years of toiling.
To avoid big mistakes: The last thing you want to do is work on your start-up for a year, only to realize you were doomed to fail from the start. Many founders learn the hard way that they didn’t set aside enough capital to reach their goals, took on partners with the wrong skills and resources, or don’t have a viable way to make money. Developing and sharing a business plan can help ensure that you’re sprinting down the right path.
To enunciate previously unstated assumptions. The process of actually writing the business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity.“Part of the process is to share your plans and get the input of others. Sometimes we are so focussed on the tasks at hand that we lose sight of the detail. Someone else will take one look and spot a giant gaping whole within seconds. You need that… If you can plan around those holes now you have a much greater chance of success.”
To counterbalance your emotions: At times during your start-up experience, you’ll be manic—so passionate about your ideas you lose sight of reality. At other times, you’ll be overwhelmed by doubt, fear, or exhaustion. When your emotions get the best of you, having a business plan lets you step back, and take an objective look at what you are doing and why, what you know for a fact and what you are trying to figure out.“I have had clients that are so excited about their new venture that they don’t want to think or hear about any potential problems. This is a mistake as knowledge is power and you can create a plan around obstacles easier than reacting to them.”
To make sure everyone’s on the same page: Chances are, you are not building a company by yourself. Ideally, you’ll have partners, so you can launch faster, smarter, and with less need to pay employees or suppliers. Even if you don’t have partners, you’ll have family, friends, and advisers involved. A business plan helps get everyone involved in your start-up heading in the same direction.“If your family are not on the same page as you how do you expect customers, staff or other parties to be? Sharing your plans with those supporting you means that you are more likely to get the support you need to succeed.”
To establish business milestones. The business plan should clearly lay out the long-term milestones that are most important to the success of your business. To paraphrase Guy Kawasaki, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death). Would you tell your spouse that you tweaked the company brochure? Probably not. But you’d certainly share the news that you launched your new website or reached $1M in annual revenues.
To develop a game plan: At a start-up, execution is everything. That means you must set priorities, establish goals, and measure performance. You also need to identify the key questions to answer, like “What features do customers really want?” “Will customers buy our product and how much will they pay?” and “How can we attract customers in a way that’s cost effective and scalable?” These are all things you’ll address during the business planning process.
To raise capital. If you raise or borrow money—even from friends and family—you’ll need to communicate your vision in a clear, compelling way. A good business plan will help you do just that. An October 2007 study by Babson College found that start-ups with a business plan raised twice as much capital as those without a business plan within the first 12 months.
To force you to research and really know your market. What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. To better understand the market you operate in, and more specifically, your suppliers, customers, and competition.
To reposition your business to deal with changing conditions. For example, during tough economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate innovative ideas and strategies.Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with innovative ideas for marketing your product/service and running your business.
I like the saying “failing to plan is planning to fail.” Anyone that takes a chance on the Lotto hopes they will win, but most realise that the odds are not on their side. So, it is the same thing with running a business. We have all heard of the entrepreneur that started something from nothing and made millions – it happens… and luck can play a role – however in most cases it is hard work and a good business plan that really sets a venture apart and allows its owners to grow something worthwhile.
“Consider the 10 reasons to plan and think about which ones apply to you… Actually, rather think about which ones don’t apply to you! Are there any? You are now asking the right questions, so starting planning…”
Greg Jewell
