Many a small business that starts out based on a whim seldom lasts to see the dawn of success. It has been generally observed that when a business is a small undertaking with very few people directly involved, entrepreneurs tend to deal with their business less professionally as opposed to how they would deal with it was there were a board of directors involved! This initial lack of discipline could lead to several problems a few months into the cut-throat world of business. This is where the importance of having a business plan arises. If you are serious about running your business, a business plan is imperative.
Eugene Kleiner, who was a famous engineer and a venture capitalist, once said, “Writing a business plan forces you into disciplined thinking if you do an intellectually honest job. An idea may sound great in your own mind, but when you put down the details and numbers, it may fall apart.”
Here are a few more reasons highlighting why every business—irrespective of size —should start out by creating a business plan.
It gives direction and purpose: In simple words, a business plan is nothing but your business’s roadmap to success. It is a document that describes the nature of your business, how you foresee it making money, how the company hierarchy would be once your business takes off, and all the other details regarding everyday functioning. When you have it all planned out even before you begin, it significantly reduces the number of hiccups along the way. Plus, you would always be on top of the direction your business is heading in, eliminating all chances of straying from the right course that you had mapped out in the beginning.
It helps to secure funding: If you are seeking to catch the eye of a venture capitalist or trying to secure a bank loan, having a business plan is a must. Venture capitalists need to be impressed by your business in order to invest in it and a business plan perfectly summarizes its objectives, the business model you are planning on adopting and everything else a VC would want to know. Likewise, most banks require you to submit a business plan document if you are applying for a commercial loan.
It aids in securing talent: It’s not easy to run a business all by yourself. You need passionate people playing different roles, and theirs goals should be aligned with the goals you have set for your business. Instead of trying to verbally convince somebody to partner up with you or join your venture, go with a well-written business plan that instills trust in your business and its growth plan. True that an elevator pitch works at times, but wouldn’t it be way more professional to have a well-documented roadmap of your dream?
It creates accountability: A business plan establishes what is to happen. This helps in setting objectives for every member in the team. When these objectives are set, it makes working towards them easier. Also, when a person has a clear idea about what is expected of them, the more accountable they become for the work they do. The same goes for the person running the business. A business plan serves as a constant reminder of why you started out and what your business goals are, making you a more responsible leader.
If you are thinking of starting a business, it is best to have a business plan so that you can strategize effectively in order to stay on top of your performance and milestones. Think of it as the foundation you are about to build your business on. If you are already running a business but don’t have a business plan, know that it is never too late to create one.