When you finally decide to take initiative and actually start a business, it can be thrilling. You are finally going to do it – you are going to become an entrepreneur. The fact that you are feeling so much enthusiasm is wonderful because you need the enthusiasm to get started down the long, challenging path that you will walk as an entrepreneur. But you also need to understand that enthusiasm is not enough, you also need to do the difficult and sometimes tedious tasks that build a strong foundation for a new business. Writing a business plan is one of those tasks.
As tempting as it can be to avoid creating a business plan, you will be much better off if you go ahead and do it. There are multiple benefits that come from having a business plan, benefits that you will be glad to have when you start digging in and really striving to get your company off of the ground.
A Business Plan – Why You Need One
1. To determine if your idea for a business is actually feasible.
It is easy enough to dream up a business idea. You can imagine pretty much anything and assume it will work great. But starting an actual business requires you to invest significant time, effort and capital. Before you start pouring your heart, soul and bank account into your business idea, you need to verify that it is feasible.
Writing a business plan forces you to analyze your potential market, the industry you are entering, the competition and other factors that can cause a business to sink or swim. You may find out that your plan just won’t work – which can definitely be upsetting. But it’s better to find out now before you start than a year from now when you have lost everything.
It is a very human impulse to avoid failure and rejection. Unfortunately, some would-be entrepreneurs give in to these impulses and avoid making a business plan because they don’t want to find out their idea is not good. But facing these feelings and testing your idea means you can fail early and try again – something that will be harder if you have lost a lot of money on a bad idea.
2. To set up your business for a smoother startup period.
The first period following the opening of a new business is hectic and can often feel like you are flying by the seat of your pants. Anytime you are facing a period like this that you know is coming, you know it’s a good idea to prepare yourself ahead of time so that you have pre-made solutions for potential challenges. Starting a business is no exception.
A business plan is your way of planning for what may come. You set up your business for success by solving the common problems new businesses inevitably face. Your business plan will include a budget for your business, your target market, the best pricing strategies you can use, logistical solutions for supplies and sales, and much, much more. Essentially, you explain to yourself and others how you are going to run your business moving forward.
The funny thing about this part of the business plan is that most entrepreneurs already to this part – they just may not realize that they are making a business plan. And because they don’t take it as seriously as they would if they were making a “business plan”, they may fail to include things they should or to get feedback on what will and will not work.
3. A Business plan to successfully apply for funding.
Lenders that work with businesses take the lending process very seriously. They have to because so much money is at stake. They don’t want to take any more chances than they have to when deciding who to lend to and who to say no to. One thing you can guarantee is that if you don’t have a business plan, lenders will not even consider your loan application for startup funding. Legitimate businesses make business plans. If you want to be seen as legitimate by lenders you will have to have your own plan.
The same is true for established businesses. Even if you have been in business for a while. If you go to try and get funding to expand your operations you will need to have an updated business plan. So, you might as well learn how to make a plan now. Because at some point you are likely going to need one.
4. It can help you adapt to new challenges.
Even if your business has been working well for a while. You are bound to run into a new situation where the old way of doing things no longer works. When you have an established business and you find that you need to change your business tactics. Creating a new business plan can be a useful way of analyzing what is working. What isn’t, and what needs to change.
5. Business plan to get new investors.
Investors are just as detail-oriented as lenders are – sometimes more so. If you want to attract investors to your business, you need a business plan. You can sometimes get potential investors excited by giving them a compelling presentation. But before money ever changes hands they are going to want to look long and hard at your business plan. Likely many other documents related to your business operations.
Is Making a Business Plan Hard?
Yes and no. If you have never done it before, you will need to learn some new things. Learn to work through some unfamiliar problems. But a little persistence will show you that making a business plan is not rocket science. Many other entrepreneurs have been in your situation. Had to figure out how to make a business plan – and you can, too.