6 Reasons to Create a Business Plan
6 Reasons to Create a Business Plan
December is National Write a Business Plan Month. Whether you are launching a start-up or expanding your current business, use a business plan to take your business to the next level.
Despite what you have heard about back-of-the-napkin business plans from hoodie-wearing techies, a business plan is so much more.
Think of a business plan as your roadmap; your GPS. You set your goals and then identify how you will achieve them.
Now, let’s look at the 6 reasons to create a business plan.
#1 – It shows your commitment.
That little piece of paper has powerful psychological powers. Simply writing your plan motivates you to implement your plan.
Post your business plan somewhere you will continually see it and be reminded of what you are going to do.
Schedule a time in your calendar (weekly or every-other-week) to work toward the goals you set. If you do not schedule time for this, you never will do it and I guarantee you will not take your business to the next level.
#2 – It is your roadmap.
How do you know where you are going? How are you going to get there?
The business plan identifies your goals and how to achieve them. Though you likely will modify your plan, having a predetermined goal is essential to success.
Be definite. Instead of saying you will “increase your revenue”, say you will “sell $50,000 of X product per month”.
Vague terms allow you to work just a bit harder but not much. Don’t use vague terms. Don’t allow excuses.
#3 – It identifies your financial readiness.
For this, you need to determine your expenses and your reasonably expected revenue. How much will it cost to make your product or deliver your service?
- How much will you spend on rent, utilities, inventory, supplies, advertising, bank loan interest, etc.?
- How much will you have to pay yourself and your workers?
- Once you determine your expenses, you examine potential revenue. First, how much are people willing to pay for this product or service?
- Lastly, how much of this product or service can you sell? Will you sell enough to offset your costs?
This is where many owners discover either (1) they are undercharging for their product or service, or (2) they can’t sell the product or service at a profitable price.
Don’t forget to pay yourself. You don’t merely get what’s left after expenses. You are a line item on the budget. What do you need to do to be able to pay yourself that salary?
#4 – It’s an honest analysis of your product or service.
You must talk to your actual and prospective customers. If you don’t know the problem your customer seeks to solve, how do you know what product or service to offer?
For Example: you wrote an app to run your can opener from your smartphone – but does your customer really want that feature? All the money and marketing in the world can’t sell a product or service no one wants.
Most products and services are incremental changes to existing products and services. Few products are truly innovative. It is a very rare person who can sell customers something that they don’t know that they need.
# 5 – You assess your company’s preparedness.
Learn as much as possible about your market. Define your target customers. Examine your company’s ability to provide the services or products.
Don’t forget about money. Evaluate your financial position. Research the availability of funding, whether through your personal funds, investors, loans, or grants.
When writing your plan, be honest. Use simple words. Jargon and buzz words do not ensure success; they just mask the inadequacies of your plan.
#6 – You assess your readiness.
Your business plan requires honesty. We all think that our product or service is the next greatest thing. However, if you and your team lack the motivation, desire, knowledge, enthusiasm, etc., success will be difficult, if not impossible.
If you are launching a business or taking your business to the next level, take the time to create a business plan.
Write it down to show your commitment.
Act. A business plan in a drawer is just scrap paper.
Continually revise your business plan as you achieve goals and find new opportunities for your business.