Running a business without a business plan is like rock climbing blindfolded. Your chances of making it successfully to the top are slim. And the process will surely be a death-defying one.
Contrary to popular practice, a business plan is not a means to securing financing. Instead it is a step-by-step guide to running your business and creating a product or service that will make it in the marketplace. And like any other map, your plan will have to be adjusted according to your vision for the company, conditions and opportunities in the marketplace and your business’ current condition.
Whether it’s formal or informal, every business has a plan. The local hair salon may not have formally written down the plan but before setting up shop, a smart owner would have assessed the need for a shop in that area of town, the ability to attract clients there, the appropriate amount of chairs, whether to hire someone to do the shampooing and sweeping, the cost of utilities and the parking availability for clients. The owner who waits to figure these things out using trial and mostly error will be lucky to be left with his/her wits, much less any customers. A business plan minimises pitfalls.
Several things you need to consider for your business plan
- What is a reasonable expectation of profitability and when?
- How will the business pay you and any team members?
- What are the estimated expenses?
- What is the pricing strategy?
- What is the need for what you are offering and what profit margin can you expect?
While much of this may have occurred to you informally, it is very important to write it down. If you ever need to approach a bank or investors, you will need it. Writing it down will reinforce your vision, give you a reference point for checking your business’ progress and will most likely bring up factors you did not consider when creating the plan in your head.
The importance of writing your business plan down
- Helps you determine and coordinate all aspects of business operations.
- Gives you a means to analyze and determine what might be the best change to boost your business out of a stagnant situation.
- Assists you in determining the risks and benefits associated with any changes.
- Decreases your chances of making a mistake or not considering important factors in your business.
- Increases your chances of success.
Business plans are not only for those just setting out on their journey in the marketplace. They are useful when acquiring a new business, forecasting growth, introducing a new product or service, entering a new market, responding to changes in the market or changing a significant aspect of your business.