3 Reasons why you need a business plan
You can think of a business plan as a roadmap that shows the direction from where you are (idea stage) to where you want to be (successful and profitable business). A business plan is not the long, complex and scary document many people think it is. In fact, a great business plan can be as simple as a one-page document and could also be a long 100-page presentation. It all depends on its purpose and target audience. Here are some of the most important reasons why you must have your own business plan…
#1 - You need it
The most important benefit of a business plan is that it helps you to put all those beautiful dreams and ideas you have for your business on paper. Contrary to what you may think; the business plans you have in your head and on paper are not the same. Taking the time to write down a plan for your business forces you to organize and refine your thoughts. For the very first time, you will be able to see how everything is connected, and some important things you never really thought about will start to stand out.
On a mental level, writing a business plan will make you take yourself more seriously. Investing time, energy and focus to prepare a plan on paper feels like signing a contract with yourself. It increases the confidence and belief you have in your business idea and focuses your mind on those critical things that are obviously missing. Before you have a plan on paper, all the ideas and plans you have for your business live inside your head. The problem is that they keep swirling around in a random and disorganized fashion. But when you have finished preparing your business plan, it feels like you have a map to your ‘promised land’ with a clear direction and a laser focus.
A business Plan helps you find the gaps in your idea and focus on the things that are really important. (photo credit: boscoanthony.com)
When you interact with an entrepreneur who has taken the time to prepare a business plan, you will know. She is usually more articulate, confident and knows the business like the back of her hand because she can visualize the roadmap in her head. This is what you get when you go through the rigour of preparing a proper business plan.
#2 - Banks and investors will want to see it
In our article: ’10 guaranteed ways to raise the capital you need for your small business’, we explored several ways to raise money from both formal and informal investors like your friends, members of your family, angel investors, potential customers and partners. Depending on the amount of capital you’re asking for, most investors (including your mom) may want to see a plan that proves to them you know what you’re talking about. Banks and formal investors (like angels and venture capitalists) want to know if your business can make enough profits to pay back a loan (with interest) and provide a good return on an investor’s investment.
Banks and investors would want to see your marketing plan. They want to see the profiles of the people who will run and manage the company. They want to see a cashflow forecast and your projected profits for the next 3 to 5 years. They want to see that you’ve analysed your competition and have a plan for your products and services. Banks and investors will want to see all these things (and more) to convince themselves that your business deserves a loan or is worth investing in. Above all, having a well-prepared business plan is often a sign that you are a serious, organised and disciplined person. This is usually the kind of person investors and banks will want to give their money to.
#3 - You can make money with it
You would be amazed at the number of business plan competitions that are available every year for African entrepreneurs and small business startups. Many of us don’t even know about them. Business Plan competitions are usually sponsored by all kinds of local and international organisations to encourage small buisnesses and entrepreneurs with brilliant ideas.
Kenya’s Lorno Rutto is just one of many African entrepreneurs who raised startup capital by winning a business plan competition / entrepreneurship contest. In 2011, she won prize money in the Cartier’s Women Initiative award (Sub-Saharan Africa category). This prize money provided the capital she needed to expand her recycling business which converts plastic waste from the streets of Kenya’s capital (Nairobi) into fencing posts. Today, her business (Ecopost) has created over 7,000 fencing posts, 500 new jobs, generated more than $ 150,000 in yearly revenues, saved over 250 acres of forests that would have been cut down.
There are hundreds of business plan competitions to choose from. A good place to start would be HERE. To enter for these competitions is easy. First, you need to make sure you read the rules guiding the competition to confirm that you are eligible to enter the contest. Above all, your business plan must present your brilliant business idea in a simple, interesting and convincing format. We’ll teach you how to do this in a moment.
3 Easy ways to write your own business plan...
You can write a basic (one page or more) business plan by yourself in less than an hour or two. This is fine if all you need the business plan for is to organize your own thoughts and nothing more. But if you need to convince an investor, enter a business plan competition or apply to a bank for a small business loan, you will need a plan that is much more detailed and looks professional. To help you with this, we recommend the following three options to get you that perfect business plan you have been looking for…
Option 1 – Use free samples and business plan templates
Life is too short to be spent on reinventing the wheel. If you're new to business planning, it can be really helpful and inspiring to see some samples before you start writing your own plan. With hundreds of free sample business plan templates out there, you don’t need to become a biz plan expert or pay an overpriced consultant to write one for you. All businesses are not the same but a sample business plan allows you to choose a format that best resembles your business and adapt the format and content to suit your needs.
Say you want to start a dry cleaning and laundry business, you can use a sample business plan prepared for Smallstarter Dry Cleaning & Laundry Services to build your own plan. Since both businesses are quite the same, you will only need to change a couple of things and Voila! you have your own business plan. We have compiled for you a list of ‘100 Free Sample Business Plan Templates’ for different types of business. This will be a good place to choose a sample template for a business that is similar to yours and adapt it to meet your own requirements.
Disadvantage(s): While using a sample business plan template is a quick and easy option, you may have problems with some parts of the plan that require specific skills like accounting, marketing and analysis. Unless the financial and marketing plans you require are basic and will not require the detailed analysis that banks and investors often ask for, you may want to consider options 2 and 3 below which take care of these disadvantages.
Option 2 – Use business plan software
There are quite a number of good business plan software out there that can make writing your business plan an enjoyable experience. These pieces of intelligent software guide you step by step all through the writing process. The outline for the business plan, titles, categories, and even charts, graphs and tables are automatically produced by the software. What is more interesting is that these software generate all the dreaded accounting information and financial statements which save you the stress of crunching numbers from scratch. All you need to do is punch in the numbers and the financials are ready in a second!
The downside of using software to write your business plan is that they are rigid and standardized. This makes flexibility difficult as you can only work with the templates in the software. In addition, it’s often difficult to apply specific knowledge and experience of a particular product, service or market to software; this is where the benefit of an expert business plan consultant comes in. If you want a basic business plan which doesn’t need any special effects, then a business plan software should work for you. However, you must make sure that the software you purchase is not very expensive and offers good technical support (you’ll definitely need this). If you think business plan software is the best option for you, we recommend that you use any of the following top products in the market.
- Business Plan Pro from Entrepreneur Magazine comes in two editions (Premium and Standard). It has over 500 sample business plans to choose from and thousands of industry profiles that help you to understand the market and any competition that exists. The Premier Plan sells for $139.96 while the Standard Plan sells for $69.95
- Live Plan by Palo Alto Software is also a great software with hundreds of sample business plans to choose from. It provides a flexible (pay-as-you-go) monthly payment plan of $11.66 and $19.95.
- BizPlan.com is another powerful business plan software. It is an online-based tool that allows you to pick a business plan sample from its huge library, edit it to your taste and then print or share it over the internet.
Option 3 – Hire a business plan expert/consultant
In today’s beautiful internet world, it has become possible to outsource difficult tasks like writing a business plan. With platforms like ODesk.com and Elance.com, you can now hire an experienced business plan expert from anywhere in the world to write your business plan for you. All you have to do is post your request on any of these websites and all these bright minds will quote and compete for them. It’s up to you to select the best offer after you have reviewed their profiles, checked their reviews, scores and ratings from previous jobs.
ODesk.com has over 3 million registered freelancers and posted 1.5 million different jobs on its site in 2012 alone. (photo credit: ODesk.com)
Working with a real-life business plan expert is much more flexible than a piece of software and the final plan can be customized to your taste. And for business plans that require complex financial analysis, sales forecasts and other kinds of stuff that require critical thinking and an experienced hand to pull off, hiring a good business plan consultant is usually the better option. On top of this, an experienced business plan writer often knows the things that banks and potential investors often look out for and can help to plug those leaks in your plan.
When will you write your business plan?
In this article, we have shared the reasons why you need a business plan and three easy ways to create one for yourself. In our next article, we will look at the different parts of a business plan and how they fit into one another. This should give you a fair idea of the most relevant information that should be contained in your plan.
Now that you know everything you need to create your own business plan, when will you actually write it? It’s important that you do not fall into the temptation of thinking that your plan is too small or straightforward and doesn’t need to be written on paper. It’s also not OK to keep the plan in your head. All of these are excuses that lead to poor planning and, ultimately, business failure. Avoid these traps and you might just be able to avoid failure.
Are you having any problems writing your own business plan? We would like to hear from you. Please leave your comment in the section below. And if you found this article useful and informative, don’t be selfish. Share it with your friends on Twitter, Facebook and Google+ using the buttons below. This information could help someone out there…
To your financial success!