Most people only write business plans during their business school courses or when they’re trying to raise venture capital for a start-up. However, the business planning process is critical at all stages of business growth.
Here are 10 of the best reasons why your business needs a business plan.
1. To establish meaningful business milestones. Your plan must outline the most important long-term milestones that will determine the success or failure of your business. You must differentiate the important milestones, such as when your business will hit $5 Million in annual revenues, versus the short-term tasks of redesigning your company website.
2. To force you to analyze your competition. Many business owners regard their competitors with scorn. It’s easy to dismiss your competitors as unsophisticated and to insist that “they don’t know what they’re doing.” But you ignore your competition at your own peril. It’s important to realize that all companies have competition in the form of either direct or indirect competitors. Understanding your competition is the first step in articulating your company’s competitive advantages to your target customers.
3. To state previously unstated assumptions. The process of actually sitting down and composing the plan helps to unearth previously unstated assumptions. After writing all of your assumptions down and vigorously assessing them, you will then be poised to test them. The most successful businesses base their decisions on cold, hard data. And the first process in this step is to state and then state your assumptions.
4. To explain your revenue model. How exactly does your business make money? Where does most of it come from? Do your revenue streams follow the 80/20 Rule? These are critical questions to answer – in writing. Documenting the revenue model helps to address any and all challenges associated with the model.
5. To force you to become THE expert on your market. What are the most important challenges facing your industry? Is the market growing or decreasing in size? What is the size of the target market for your product/service? To become the leader in your market, you must know these answers like the back of your hand. Drafting – and updating – your business plan will force you to gain this expertise.
6. To uncover fresh opportunities. The process of business planning forces you to stop focusing on the immediate operations of the business and view your business from a new, more distanced perspective. As a result, you will likely find new ideas for operating and marketing your business.
7. To strategically focus your resources. Your business plan provides a useful roadmap. Without a business plan, you will likely modify short-term strategies without a perspective on your long-term milestones. It is essential that you stay focused on the long-term milestones that are most important to the success of your business. Your business plan clarifies where you should marshal your resources, time, and money in order to achieve those milestones.
8. To expertly position your brand. Drafting your business plan forces you to define and re-define the role of your business in your marketplace. The business planning process allows you to succinctly describe the business and position the brand to your target market, as well as to new and existing employees, partners, and investors.
9. To attract and retain employees. An excellent business plan is necessary to attract and retain world-class talent. Your business plan must inspire employees and management staff that your business is poised to become a market leader and achieve phenomenal success.
10. To accurately forecast your company’s future needs. Your business plan must provide guidance from a short-term, intermediate-term, and long-term perspective. An excellent business plan provides a roadmap for all of your staffing and financial needs, and thus helps to ensure that you grow rapidly but without major bottlenecks and hiccups. To ensure smooth expansion, it is important to continually update your business plan to account for your company’s growth and the evolving competitive challenges in your marketplace.