5 Reasons to Write a Business Plan
A business plan is an essential document that provides several benefits to a prospective business owner. Remember the saying “If you fail to plan, then you plan to fail?” This saying is especially applicable when it comes to the running of a business. The business plan oftentimes sets the standard for a business and contributes tremendously to the success or failure of that business. To be useful, the business plan must be documented rather than being stored in the head of the owner or owners. Below are five reasons we feel all business owners should have a written business plan.
- Avoid Making Big Mistakes – A properly written business plan will help the business owner to avoid making big mistakes. The very process of writing the business plan gives the owner(s) an opportunity to flush out his ideas and thoughts carefully in a methodical manner. By doing this, they are able to clearly identify and correct any flaws that may exist in his business idea, saving them from making mistakes in the actual establishment of the business. It is always better to prevent a problem than to fix a problem that could have been avoided with careful planning.
- Necessary for Raising Capital – A business person who is seeking capital to fund his business idea will need to present his plans in writing to prospective investors or financial institutions. This document along is critical in laying out a roadmap for where the owner envisions the business going. A well thought out business plan can help tremendously, especially in the early stages when most startups or small businesses aren’t profitable. This document can help ease concerns and show potential investors that as an owner you have thought through this idea and it is worthy of consideration for investment. If the idea seems feasible on paper, the business owner is more likely to be successful in his efforts at raising funds.
- Provides a Roadmap – A business plan is a useful guide that will help the business owner to stay on track with his or her business goals. It is a document that you can measure your business against as it progresses. For instance, most business plans will include revenue projections, subscription projections, etc. As you move forward with the business plan you can measure your success or lack of success against what you had originally laid out. Periodically, you can then see is my plan working is it not working? Do I need to make an adjustment in a key area? These major decisions can then be made with the business plan serving as a roadmap that indicates where the business is in terms of accomplishing established goals and objectives. Corrective actions can then be taken as necessary.
- Holds the Owner Accountable – Business owners need to write business plans to keep themselves accountable for accomplishing their established business goals. Many owners we work with have a habit of chasing revenue streams or business avenues that weren’t part of the original plan. In many cases, these “opportunities” offer tremendous “potential revenue” that is going to make the company a huge success. While the initial excitement is easy to get caught up in these “opportunities” hardly ever pan out and an owner ends up wasting a large amount of time and energy for nothing. We encourage owners to explore all possibilities, but evaluate how the “opportunity” affects the core direction of the business. By having a written plan an owner can look at an opportunity and gauge its effect on the original business plan. They can determine is this something that will help me achieve the objectives of the business plan?
- Facilitates Decision-making – A properly written business plan facilitates decision-making since all major goals and objectives would have been included in the plan. This coincides with the point above. In many cases an owner needs to evaluate how the effect of the decision they make helps facilitate the execution of the business plan. Consequently, all activities should support the overall long-term plan and will make decision making less complicated.
While writing a business plan is beneficial is several respects, it must be kept in mind that business plans should not be cast in stone. The business plan should be updated periodically as the business grows and should take into account any factors that were originally missed or that may have developed along the way. The idea is to have a plan that is realistic and follow it in order to accomplish your business objectives.
Lavin Group specializes in helping small businesses and startups save time and energy on their accounting needs. We want to be a partner in your success and give you the guidance and support from a financial prospective to help you implement and achieve your business plan.