WHY YOU MUST HAVE A BUSINESS PLAN
Business planning is the elephant in the room for most small and medium enterprises (SMEs) and start-ups, and many of the people who need a business plan don’t even know they need it.
Let’s face it, when you are excited about your great new business idea and can’t wait to get going, the last thing you want to do is to sit down and spend week or months crafting a business plan.
But the business plan is a strong tool, especially for start-ups and SMEs. It provides you with every detail of your business and allows you to review the hard-clear facts that are needed to make strong and successful business decisions, even if it means starting the business over. So, take a business plan as a map and a compass for a business. Without it, you are travelling blind. With a business plan, you set objectives, establish priorities, and provide for cashflow.
What is a business plan?
It is a written description of your business’ future. It describes what you plan to do, and how you plan to do it. It also contains goals, and methods on how these goals can be attained, and provides the time frame that these goals need to be achieved.
Uses of a business plan
Business plans can help perform a number of tasks. They can be used by investment seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.
What can be included in a business plan?
A business plan conveys your business goals, strategies that you will use to meet them, potential problems that may confront your business and ways to solve them, the organisational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.
Who needs a business plan?
• Everyone who is running a business: The only person who doesn’t need a business plan is one who’s not going into business. Anybody beginning or extending a venture that will consume significant resources of money, energy or time, and that is expected to return a profit, should take time to draft some kind of plan.
• If you are applying for a business loan: Most banks require it, and even those that don’t strictly require it expect it. They expect it to be a summary of the business, with some predictable key points.
• If you are looking for business investment: While the business plan will not get you investment, but not having a business plan means you won’t get investment. Investors require a business plan. They invest in the people, idea, track records, market, technology, and other factors; but they look to the business plan to define and explain the business.
• If you are working with partners: The business plan defines agreements between partners about what’s going to happen.
• To communicate with the management team: The day-to-day business routine is distracting, problems come up, opportunities appear, and commitments should be followed and tracked. How can you know where you are in business, without establishing where you started and where you intended to go? How can people commit to a plan they can’t see?
• You need a business plan to sell a business, or to set value on a business for tax or other purposes.
Sadly, most of the people who need a business plan don’t know they need it. They don’t realise that business plans are not just for start-ups, loans, or investment. Also, they don’t realise that business plans are easier to develop than most people think. To succeed in business, you simply must plan the steps, set priorities, allocate resources, and manage the cash. Sure, some people say they don’t plan, but if they are successful, then they are actually always planning in their heads. But you can only keep the plan in your head if your business is very simple, cash-flow is always adequate, you don’t work with other people, and you don’t need to communicate your business plan with other people either.
If you fail to plan for your business, you are planning to fail. Doing a business plan is also probably much easier than you think, and much valuable.
>> Quote of the week
“If you fail to plan, you are planning to fail,” –Benjamin Franklin.
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