A business plan isn’t just for startups. It’s also important when your business is set to take another step up in its growth journey. Sure, growth can happen to you, sometimes even when you’re not expecting it. But it is much more likely to be sustainable and long-term when it is part of a strategic plan.
It cannot be stated often enough: Luck is not a strategy.
What is a business plan exactly? It can be defined as a map, an important document that goes further into details regarding your company, what it does, and its goals. And if you’re not too sure that it’s important then maybe you should check out these facts below.
Main Reasons Why You Should Have A Business Plan
Set your target
As a business owner a good business plan will help you to identify your target. What is your vision? Where do you want the company to be within a set timeframe? What does success look like? A business planning process will take you through each of those questions, within the context of past results, customer feedback and market research, to help you set a realistic but challenging vision. Fundamentally, if you do not know where you want to go, it doesn’t matter what you do. A business plan helps to set the destination.
Once you have established your vision, you will be able to more clearly see the challenges and obstacles in the way and create a strategy that will help you to overcome them as effectively as possible.
It Decreases Potential Risks
A business planning process will include a thorough risk analysis and also a review of the emerging external environment, often known as a PESTLE analysis. This looks at the potential impacts on your vision from the following arenas: political, economic, social, technological, legal, and environmental. A solid understanding of those issues will enable you to adjust your strategy in good time to more effectively meet emerging needs and trends and avoid potential pitfalls.
To review those areas objectively, it can help to engage a business plan consulting specialist. When looking at risks, it can be too easy to minimise obstacles that are not convenient.
Your risk analysis should include a contingency plan that reveals risks and will show you how you can respond to them efficiently.
The most common risks and reasons for business failure are:
- Lack of money
- Lack of market need and impact
- Huge growth that exhausts all your capital
- Excellent competition that has been underestimated
- Unresearched pricing (too low or too high)
Lack of funds is probably the biggest area of risk for growing businesses.
What Are Other Reasons That Haven’t Been Mentioned?
It’s Relatively Easy To Create
Business Planning is a tried and tested format that is relatively easy to follow. It will take time, research and effort, but if you are committed to doing it properly, you will find the process relatively straightforward. It will showcase all your plans in the next three to five years and outline the path you’re going to take to make sure your company prospers.
Most importantly, this is a project that is meant to help you out for a longer period of time, not just a one-time thing. You can always divide it into several smaller plans, one intended for advertising, one for sales, one for operations, employees, pricing, and many other aspects of your company.
To Communicate Benchmarks And Objectives
The business planning process is as, if not more, important than the end result. You should engage your team and stakeholders in the research and consultation exercises that you undertake when you are putting the plan together. If they are involved, they will have much great insight and ownership of the final plan and all of the myriad decisions that make it up.
A business plan is also an excellent communications tool. It clearly sets out your company strategy to your team and stakeholders. It keeps you all on the ‘same page’. Think of it as a perfect sidekick that is here to answer all essential questions each time you’re not able to do that. This will let your colleagues know that whenever they are in doubt and need some consultation, they can always turn to it, and then they will know exactly what to do next.
Therefore, it’s crucial to share your business plan with all the other members of your team, just to make sure that every single one of them is aligned with everything that’s you doing and share the same approach and vision as you do.
It Is Going To Help You Accomplish Huge Milestones And Goals
Every properly-designed business plan is supposed to outline SMART milestones and goals. What does SMART represent? It includes these things:
It isn’t just enough to create a business plan. You also have to embed some milestones and goals into it because only then it is going to be complete. Namely, if you set certain milestones and goals for your business, and your team as well that are not aligned with the strategy that was part of your business plan, you will have a difficult time aligning the team around the same priorities.
That’s precisely one of the reasons why you should employ your business plan to set some really high-level milestones. And then once you have done that, you should utilize them to create some truly amazing goals.
Collaborate With Investors
A business plan is an essential tool if you are looking to work with or attract investors. In these instances, a solid business plan can be the most important document in the world because it will provide them with the confidence and structure they need to make decisions when it comes to supporting and investing in your business.
To Attract Partners
Potential partners, just like most business owners want to see a good business plan to determine whether you’re worth their time and money. A majority of entrepreneurs will work with you only if they see a thorough explanation of your corporation.
As you can see, a business plan is like a road map. You can travel and function without it, but you are much more likely to succeed if you set a clear direction with the strategy to see it through.