A Man Without Purpose Is Like A Ship Without Rudder – Thomas Carlyle
This seemingly simple sentence has a very deep meaning especially for entrepreneurs and small businesses. These are ventures where business growth is synonymous with personal growth. And for you to grow it is a must that you have a plan in place.
Imagine yourself trying to shoot a disc that you cannot see, you do not know its direction, you don’t know its distance, you do not know its size and shape and worst of all you do not even know if it is still there. Yes, there might be a miracle and with all the good luck and blessings, and by virtue of you being a good person, God might take pity on you once and let your arrow fly and land on target perfectly. But can you expect this happening over and over again? NOOOO!!! NADA!!! CANNOT HAPPEN!!!
Now imagine, your business that is the source of your earning, working without a Business plan, any goals any direction, how can you expect it to survive yet alone make it profitable. No, my friend, it is simply not possible.
To bring more clarity let me share with you 20 reasons why you must create a business plan for your venture.
1 Understand How Your business Will Make Money
Understanding how you will reach your customers; how will they buy your products are key questions in understanding your business model. This will give you deeper insights about forthcoming challenges related to a business models and help you plan risk mitigation strategies.
2 Ascertain The Business Opportunity
When you create a business plan, you are aware of realistically what business opportunity you can target and create milestones and goals around the opportunity. Most importantly you get aware of your target group and get a genuine sense of business feasibility.
3 To Know Your Business Goals
Creating a long-term vision and establishing goals that drive your business to achieve that vision is not a task that every entrepreneur can do. But successful entrepreneurs have already realised the importance of this very exercise. Now your goals should be worthwhile so that you get motivated and feel that sense of elation once you achieve the business goals. Soon you’ll set you eye for that $1 million marks and through your business plan, you are going to achieve it and it will be a worthwhile achievement that you can share with your family, friends, and heck yes the entire world!!!
4 Create Better Understanding Of Your Own Business
Whenever you operate a business, there are unsaid rules of engagements that are part of your value chain. Many times these are in the form of assumptions that are hidden. Creating a business plan is the best way of uncovering these assumptions and promptly identifying those that may create bottlenecks or have adverse effects on business. Nevertheless, even if an assumption works in your favor it is good to have it documented so that all assumptions are in the sphere of awareness and do not remain hidden anymore.
5 To Evaluate And Understand The Market Where You’ll Compete
Knowing opportunities as well as threats in the industry is not only crucial but a factor that determines business existence. Understanding the most important trends in your industry and positioning your business to leverage these will help you succeed. Understanding the threats and preparing to deal with them is necessary for survival and creating the correct product/service mix. Creating the business plan will help you to gain a deep understanding of the environment in which your business is going to operate.
6 Know Who Will Buy From You
I always tell my clients understanding your customers will help you target the right customers who will pay the right price which will give you that Mega profit. Either you can sell your products in a transactional manner which can be a short-term tactic, or you engage your customers and sell them solutions to their problems. Both these action point need you to have an excellent understanding of your customer need. Understanding your customers is another essential element of a business plan that will drive your marketing, the way you sell, and most importantly answer critical questions like why they buy, when do they buy, when they do not buy.
7 To Create Effective Marketing Plan
Finding, reaching, engaging, retaining your customers is need for the modern age business. A through business plan will pave way for an effective marketing strategy and allow tactical tools to accomplish the business goals.
8 To Assess Your Competition
An essential step in the creation of a business plan is evaluating your competition. Understanding their strengths, weaknesses, creating competitive benchmarks that can help you gain an advantage. Most importantly, learning what your competition is doing to create customer delight is a must for you so that you can replicate it or innovate yourself and create a strong foothold in the market.
9 Define Success Parameters For Business Functions
Irrespective of the size of the company, there are business metrics that need to be achieved, Business plan execution allows to benchmark actual results vs planned results. This will help you visibly judge the effectiveness of your goals, determine the cause of variation from a business plan and refine the success parameters of your business.
10 Give Direction To The Company
Long term planning and business plan serve as a map to the future. As there are clear expectations for each department, it makes short term planning easier and in alignment with long term vision of the company.
11 Audit Direction Of Your Business
Modern age as well old age entrepreneurs have always understood that the economic feasibility of business is critical. Through research and analysis helps to ascertain what is the opportunity cost of current opportunity and how it can be minimized. Creating a business plan will put you face to face with other opportunities in the market and this serves as a self-audit to ensure that you are not running after a wrong opportunity.
12 To Understand Your Financial Needs
Understanding your cashflows and capital requirement are two key components that every entrepreneur should be aware of. Determining how much investment is needed at what point in business is a crucial factor for your business success. Especially if you deal with seasonal product planning of your cash flow is even more crucial for success. Effective business planning will clarify your needs and forecast requirement for business investment at different stages of business.
13 Opportunity To Seek Investments
Needless to say, if you are looking for financing be it through a bank loan or VC funding, a solid business plan is a must have. Success in seeking investment is greatly dependent on how the hand on you are on business matrices and the overall concepts as well as having solid financial projections that can show the true potential of your business.
14 Create Strong Company Brand
Once you create a business plan, the immediate benefit is that you have a much better understanding of your marketplace, your business, and your customers. How you’ll position yourself in this environment will determine the strength of your brand.
15 Be A Proactive Business In Constrained Environment
Business Goals and milestones are not the only measures of progress but indicators of your business moving in the right direction. Timely analysis of missed goals and targets can help uncover hidden trends that might be working against your business. For instance, during troublesome financial conditions, if your present deals and operational models aren't working, you can innovate and modify your short-term strategy, operation matrices as per current requirement and exactly know what to do once the market conditions have improved.
16 To Estimate Human Resource Need
Successfully executing a business plan will create demand for human resources. The right business plan will give you visibility of workforce requirements at each level of growth and helps to ensure a smooth expansion of staff.
17 To Bring In Quality Talent
Clarity of your vision is crucial in determining the course of your business and getting the right talent for your venture. If you want to have the right people working for you, then you need to give them the right goals, challenging opportunities. A business plan becomes instrumental in sharing the vision with your team and top management hired by you and showcasing that they have a long term opportunity with you.
18 As A Show Of Commitment To Your Business
A business plan is a formal documentation of what your business can achieve in terms of sales, profits, and other financial measurements. Formal documentation reinforces the belief of all stakeholders in the business.
19 Seek New Opportunities
A customer centric organization always seeks inputs from its customer. Adopting a mechanism to utilise this information (brainstorming, business analysis, etc) you, your team will find new and better ways of doing things as well as create solutions for your customers. This is an effective and low risk manner for ideating new ideas for the process, marketing, or product /service.
20 Expansion And Market Collaborations
From a CFO’s point of view - business plan, business charter, and healthy account books are necessary while planning for partnerships and expansion strategies. Healthy collaborations work on mutual understanding of benefits in the relationship and long-term planning with partners through a business plan is the best way to achieve it. Especially to create an understanding of the opportunity cost in such a relationship, a business plan serves a crucial role.
I think it is clearly demonstrated that the benefits of creating a business plan outweigh any reason that you may have for not creating it. I hope you pull yourself together and work on this most essential step at the earliest. Do remember, simplicity in a business plan will help execution in line with planning.
So till next time - Stay Happy, Stay Healthy & Stay Profitable.
Disclaimer: The above mentioned advantages are not typical. Actually derived advantages depend on research and due diligence with which the planning is done and executed by the business.