So, you think you don’t really need a business plan?
Most people make the common mistake of thinking that business plans are only for startup businesses looking to raise capital.
Big lie! Even established companies need business plans too.
Plans are useful at every stage in the life of a business, whether it’s looking for startup capital or considering options to expand into foreign markets.
In this article, we shall look at five powerful things a business plan can and will do for you and your business. Whether you’re still at the idea stage or have an existing business you want to grow and expand, I’m sure you will find great value in the things you’re about to read.
First, a few important questions…
Why do many entrepreneurs who have brilliant business ideas never find the capital to transform their ideas into real-life businesses?
Why do most startup businesses fail to attract the loans and investments they need to grow and succeed?
Why do more than 80 percent of businesses fail within their first five years?
One simple answer:
Many of them didn’t have a plan.
Like most people who travel to an unknown destination without a map, guide or directions, these businesses got lost and never reached their destination (success).
A business is not a hobby or playful adventure. As an important venture that requires an investment of time, effort and money, entrepreneurs just have to take business planning very seriously.
One thing is clear: planning is a habit of ALL successful businesses that still exist today!
Now, let’s take a closer look at the five main benefits of a business plan for you.
#1 A Business Plan is a Strong Commitment
“It pays to plan ahead. It wasn’t raining when Noah built the ark.”
– Peter F Drucker –
According to data from the Panel Study of Entrepreneurial Dynamics, which involved a survey of more than 800 people in the process of starting businesses, writing a plan greatly increases the chances that a person would actually go into business.
Entrepreneurs who have the discipline to prepare a business plan are two and a half times more likely to get into business.
Writing a business plan helps you to focus and fight procrastination. Investing time and effort in researching your target market, analyzing your competitors and estimating profit figures is bound to increase your interest in bringing your business idea to life.
A business plan has the power to positively affect your mindset.
When an idea is left undeveloped, it starts to lose significance. As you gather information about your business, you start to develop a strong level of confidence and ‘can-do’ spirit around your business idea. You will experience less fear and see more possibilities in your idea.
Whether you plan to start a business from scratch or want to expand an already established business, a plan will keep you interested, focused, committed and determined to take action.
#2 A Business Plan Helps To Develop Your Idea
“Planning is bringing the future into the present so that you can do something about it now.”
– Alan Lakein –
When you first have an idea, it exists as a cloud of thought in your mind.
The problem with thoughts is if you don’t write them down, you may forget or never remember them entirely.
So you decide to write down your brilliant business idea on a piece of paper (or in MSWord on your laptop). Yes, finally, it can never be lost or forgotten!
The problem is, what you have written is just an idea, and it’s not the same thing as a real life business. To become a real business, certain actions and investments of time, effort and money must happen to transform your beautiful idea into a successful business.
How will you start? How much will you need and who will you get it from?
What kind of customers will you target? Who is your competition and what will you do protect your business from them?
Are there any licenses, permits or government approvals you need before you start? Who will be responsible for what?
All of these are important questions that must be answered in order to transform your idea into a real business.
A business plan allows you to see your business from the top and understand how all the elements will fit into one another.
The most important thing that every plan does is to bring your attention to gaps and holes you may have missed because they didn’t seem very apparent in the beginning. In fact, business plans often bring up interesting and creative alternatives that could make your original idea much better and powerful.
#3 A Business Plan Makes You Prepared And More Likely To Succeed
“To be prepared is half the victory.”
– Miguel de Cervantes Saavedra –
I just love Toyota because it’s definitely one the most successful car brands in the world. Year after year, it continues to release the most beautiful and reliable ‘driving machines’ my eyes have ever seen!
Like most car manufacturers, Toyota invests a lot of time, effort and money in the early stages of developing every new car model.
A couple of years before the new model is released, Toyota’s engineers and specialists brainstorm tirelessly on different aspects of the new car model, especially in the areas of comfort, safety, speed, control and beauty.
Why doesn’t Toyota just go ahead and build the car? After all, it has a top team of highly talented and experienced designers, engineers and technicians. With all its talent and experience, why does Toyota still spend all that time, effort and money in planning?
Toyota is serious about planning because it knows planning is always required for success. It knows planning is critical to build cars that people will love and be happy to buy. It invests in planning at the early stages because it knows that’s the best way to build something that will beat the competition. And guess what, it always works!
Toyota is always prepared; that’s why it always succeeds!
Abraham Lincoln, one of the greatest presidents of America that ever lived, once said:
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
What does this tell you about planning? Unless you plan to waste time and suffer the emotional trauma of mistakes, investing in planning usually leads to better preparedness, fewer surprises and a higher likelihood for success.
#4 A Business Plan Keeps You and Your Business Accountable
“Proper planning prevents poor performance.”
– Charlie Batch –
You are very likely to be the biggest risk to your business. Yes, you! Because you’re answerable to no one in your business, there’s usually that temptation to take the business for granted. It’s your idea and your business. Everybody answers to you because you’re the boss almighty. But who do you answer to?
Unlike your employees who can be fired, there’s no punishment and nothing to hold you accountable if you procrastinate, backslide or fail to meet targets and deadlines.
A business plan allows you to set goals and track your progress and levels of achievement over time. Without this accountability, your business will always be subject to guesses and impulsive actions and will definitely perform below its best potentials.
People who set Specific, Measurable and Time-bound (SMT) targets for themselves usually perform much better than others. If I plan to lose 5 kilograms (11 pounds) of weight in one week, that’s an SMT target.
If I start on Sunday and by Wednesday, I notice I’ve lost only one kilogram, I would be moved to increase my efforts because I know it would be impossible to achieve my target if I continued at my current pace.
Because I know my target is time-bound (1 week), there will be more urgency in my attitude to meet this target. And when I meet my targets, I make progress; which is exactly the result I want!
A business plan is the only way I know for entrepreneurs and businesses to hold themselves accountable using Specific, Measurable and Time-bound targets. It’s the best way to eliminate procrastination, reduce the fear of failure and inspire yourself to take quick and bold actions that will make your dream business come true!
#5 A Business Plan Increases Your Chances of Raising Capital
“Good fortune is what happens when opportunity meets with planning.”
– Thomas Edison –
Nobody can read your mind. This includes potential business partners, bank loan officers, investors and other people who can provide the capital you need to start or expand your business.
How can you bring out that brilliant business idea from your mind and present it to these people in a way that convinces them to invest in and support your business?
Well, there’s an easy option. Why don’t you just open your mouth and tell them the whole story. Hahaha! Most people who try this will surely end up confused and stammering.
Why put yourself through this trouble when you can have a business plan do all the talking for you?
A plan is the most effective way to communicate your business idea to other people in a clear, complete and convincing manner. It’s no longer that odd idea you had in your head. It’s now on paper. It’s concrete proof to anyone who sees it!
Partners, investors and bankers are more likely to take you seriously if you have a well-written and professional business plan.
Banks and investors actually take business plans very seriously. Why? Because the information it provides helps them to properly measure the risk of investing in your business.
Banks and investors take calculated risks; they’re not gamblers. It’s highly unlikely that they will give you their money and hope that your business is successful and turns a profit.
Anybody who’s interested in your business idea wants to see that you have taken the time to do a proper and detailed planning. They want to see your Profit Forecasts. They are interested in your Competitive Analysis and the quality of experience you have to successfully run the business.
The more information they have, the more convincing your business dream becomes to them.
Whether you’re applying for a bank loan, looking for a partner or venture capitalist to invest in your business, applying for a government loan or grant, or entering for a fundraising competition, you stand a better chance of winning and raising the capital you need if you have a well-written and professional looking business plan.
Do You Have A Business Plan?
“Failing to plan is planning to fail.”
– Alan Lakein –
A business plan is not just a fundraising tool or that boring document that only big businesses write. It’s for everybody!
It’s for the young lady who has been nursing an idea and wants to quit her job to start a dry-cleaning and laundry business.
It’s for that man who has been running a bread bakery for three years but now wants to expand his business and take it to the next level.
A dream is still a dream until it leaves your head and becomes a Specific, Measurable and Time-bound plan.
Do you have a plan for your business idea?
In the next part of this business plan tutorial series, I’ll tell you a personal story of how a business plan helped me raise $12,600 in capital to start a business. If you’re one of thousands of entrepreneurs who’s looking for capital to start a business, I’m sure you’ll learn a thing or two from my experience.
You can read the full story here.