Think You Don’t Need A Business Plan? Think Again

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.

How to Make Your Business Plan Efficient and Effective

If you are an entrepreneur thinking about business planning for your startup or to develop your existing business, consider an effective way to write your business plan. With a plethora of software accessible, it is more often than not that business owners lose their core objective while they start business planning. Business planning is a continuous process not an event where you write and forget about it. Planning an effective business plan needs plenty of work and time. Do not rush yourself or your consultants while planning.

The key to having an effective business plan is dynamic adaptability. Recognize these key concepts before you start making a plan.

1. Make your strategy the soul of your plan- Strategy is the key. It is important to focus on your target market using specific products or services. Your strategy should be based on your niche or your unique characteristics that links you to your customers. It should define how you want to set your business apart from the rest. Strategy should be a concept, which can define you, your product, your market and your specific branding focus. While you can change most of the business planning aspect quickly; your strategy is the slowest and the hardest to change. Before you finalize your plan, make sure to develop a backup plan in response to changing conditions of your available resources, time and quality.

2. Do a little more research- Before you build your plan, research thoroughly about your target market, key customers and branding. While you don’t need to elaborately write your research in the plan, try to summarize your key concepts with bullet points or graphs or even pictures. Understanding your competition and the volatility of the market in depth prepares you to expect the changes gradually than severe swings. Research brings more focus to your strategy, strengthens your products or services and defines your niche aptly.

3. Plan milestones – Plan your entire operation with milestones.Track your progress with milestones, achievements, lists and tables. The most important part of milestone planning is to run a business on strict budget and resources. Resources can be time, material or services and human effort. Milestones should be practical, measurable and concrete. Keeping your expectations reasonable will benefit in achieving short term goals. Again do not lose heart if you are behind on your milestones, just do an overview of your plan periodically and modify changes accordingly.

4. Make your business plan lean – You might be surprised about the term lean in business planning. However understanding the lean concept of planning is a must if you want to make it effective and efficient. Lean doesn’t mean thin or lack of details. Lean means powerful, effective and efficient. Learn to write your business plan according to your vision rather than adapting to a template. If you go to a consultant ask them for more customization rather than trying to fit into one of their packages. Lean concept of business planning helps you to write essential elements that are required for your operation; it helps to promote your brand as unique in the market.

5. A dynamic plan for volatile market- In business, continuous planning matters. Your plan should be dynamic based on your need and extremely customized for your product. Never stop planning if you want be ahead of the curve. Your plan should accommodate volatility of the market to keep you running. Your plan should have enough wiggle room to experiment with new products or services.

6. Writing for specific audience – Keep in mind your audience while writing your business plan. If you are writing to get capital from angel investors, add details of your plans, expansion and practical use of your product or services. If you are intentions are on borrowing money from the bank, their expectations are different. You have to concentrate on providing more financial information like cash flow; balance sheet and financial models to procure the loan. If your are presenting for your future clientele, make sure to add key performance indicators, market analysis and value of your product or service. Adding information about your education, your work background and your association with charity work might fetch you the capital instantaneously.