Do you have a business plan? Convinced you don’t need one? Don’t have time to create one? Overwhelmed by the idea of putting a business plan together?
Even if no one sees your business plan after you create it, the process of developing a business plan provides invaluable information and insight for making your business a success.
Still not convinced? Keep reading to find out why you absolutely must have a business plan.
What is a business plan?
Think of a business plan like a blueprint for building a successful business. It provides clarity on all aspects of your business and offers a realistic strategy you can follow to achieve your business goals.
If we’ve learned anything over the past year, it’s that the unexpected happens and sometimes our plans must change. Your business plan isn’t set in stone. When the direction of your business changes or the economy surprises you, you can make adjustments to your plan. It’s recommended that you review and revise your business plan annually.
Even though a business plan can change as you go, you still need to have a plan to start with!
1. A Business Plan is Your Roadmap
It’s possible to find a destination without a roadmap, but with a roadmap, you’ll get there with fewer unnecessary turns and detours. You’re less likely to have to stop to ask for directions. That roadmap becomes even more valuable when you encounter roadblocks.
Your business plan is your roadmap to success. It shows you where to go and how to get there.
2. A Business Plan Proves the Viability of Your Business
New businesses are born every day out of nothing but an idea. Some ideas are good, but the reality is often less than ideal.
A business plan is like a safety net. If working through the process of developing your business plan reveals that your business idea is not viable, you’ll save yourself a lot of time and money. It can show you an alternative that might work better.
3. A Business Plan Provides Invaluable Insight
A business plan explores more than your own business. It dives into market research to give you valuable insight into your customers, competitors, and industry. This information will inform your marketing strategy and the products and services your business offers.
4. A Business Plan is a Necessity for Financing
If you are looking for investors or financing of any kind, you need a business plan. Bankers and investors will ask to see it. They want to know how you’re going to generate revenue, how profitable your business will be, and how and when you’ll be able to pay them back.
“There are 2 key questions your business plan needs to answer for financiers,” says Rick MacLennan, President of MACINK Consulting. “1) How much money do you want? and 2) How are you going to pay it back?”
If all you have is a solid business idea and a viable plan in your head, you really have nothing to show potential lenders or investors. A business plan articulates the details. It allows you to “show”, not just “tell”.
A solid business plan can make the difference between getting the financing you need or not. It can also result in getting more financing than you would without the business plan.
5. A Business Plan is a Requirement for Commercial Leases
Did you know that landlords for commercial space want to see a business plan? They have substantial costs and risk involved in holding the commercial space, so they want to know if you have the cash flow to pay for it.
“Comprehensive market analysis, competitor analysis, and the business background or working history of the owners or principals of the business are key for landlords, too,” says Jeff Thomson, Senior Vice President of CORE Commercial Real Estate, a firm that represents commercial tenants.
Jeff encourages business owners to invest in a business plan because it saves you money in the long run. “A business plan can mitigate the landlord’s desire for a larger deposit and/or personal guarantees. We’ve seen time and time again that, if you have a solid business plan, landlords will give you a better deal.”
6. A Business Plan Simplifies Decision-Making
Managing a successful business involves seemingly endless decision-making. A business plan simplifies this crucial task by answering critical questions in advance. It can help you determine when it makes sense to upgrade equipment, purchase new assets, or expand into an additional work space.
7. A Business Plan Reduces Risk
Only half of new businesses survive their first 5 years, according to the BDC. Why do so many businesses fail?
According to CB Insights, the top 5 reasons are:
- No one needs what you’re selling.
- You run out of money.
- You didn’t hire the right people to help you run your business.
- Intense competition.
- A failure to price your products or services profitably.
A business plan reduces the risk of failure by proving the viability of your business, exploring the market and competition, outlining logistics and operational processes, and providing revenue and expense projections.
8. A Business Plan Improves Your Marketing Strategy
When your business plan includes a breakdown of your target market, market analysis, and market projections, it’s easier to clarify how you’re going to reach your potential customers. The data included in your plan can show you where to focus your marketing efforts and how best to communicate effectively with your target audience.
9. A Business Plan Attracts the Right Team
Any successful business has a team of talent working together to achieve your goals. That team might be staff, business partners, vendors and suppliers, contractors, freelancers, or other professionals like lawyers, accountants, and consultants.
Your business plan can help you choose the right people to develop the team that will propel your business in the right direction. You can also use it as a tool to show your team the vision, direction, and growth potential of your business.
10. A Business Plan Provides Structure & Management Objectives
When consulted regularly and kept up-to-date, a business plan can help you set and reach significant objectives and benchmarks. Your plan provides accountability and focuses your intention and your attention.
How to Create a Solid Business Plan
You can create a solid business plan on your own. It should include:
- Owner/Principal background and working history, including qualifications and experience
- Past accomplishments, such as sales or hiring milestones, product development and patents, partnership agreements, etc.
- Detailed financial projections
- Cash flow projections
- Comprehensive market analysis
- Competitor analysis
- Customer segmentation
- Marketing strategy
- Logistics and operational processes
It’s crucial to formulate an executive summary of your business plan. It’s like a cover page for your resume. It must grab the reader’s attention and show that you’re serious and capable.
In most cases, it’s advisable to hire a professional (like Rick at MACINK Consulting) to help you develop your business plan. The cost typically ranges from $2,000-$15,000, depending on market research.
“Yes, it will cost you money initially, but it will save you money in the long run,” promises Jeff Thomson of CORE Commercial Real Estate. Consider the exponential savings in reduced commercial leasing, mitigated risk, proven viability, and intentional planning.
Do You Need a Business Plan?
Would you build a house without a blueprint? No. So why attempt to build a business without a carefully constructed plan?
If you would like more information about business planning, or need some help writing your business plan, contact the team at Lease 1 Financial, or go directly to Rick at MACINK Consulting and tell him Lease 1 sent you!
