Why Each Business Needs A Business Plan
Author: Terry Harrison
Most people view business plans as a busy work document that was a part of a business course they attended somewhere a long time ago, and that is sometimes useful for getting funding, but not for much else. And of course, there are many consultants, seminars and gurus to tell you how to run a “super successful” business, and you might think your money is better spent on one of them. (At least, that’s what they hope.)
Having developed business plans for a while, I’ve heard the objections about business plan development. Most boil down to simply not understanding the value a good business plan provides. Admittedly, developing a good business plan is complicated, time consuming and sometimes it can seem arcane, especially to the entrepreneur who just wants to “get on with it.” However, for the serious business owner a business plan is essential. Let me provide a few reasons why.
First, developing a business plan forces you to take a hard look at the overall industry you’ll be working in. Is the industry growing with lots of opportunities available? Is it mature with well established competitors with a significant market share? Or has it gone into decline and consumers are shopping elsewhere? Knowing what’s happening in the industry affects what products or services you offer, where you will offer them, how you will market them and even how long you intend to stay in business.
Second, you’ll take a hard look at your “company.” Granted, at the moment your “company” may only be an idea, but as you go through the process the company starts taking shape on paper. What exactly is it you’re offering the marketplace? What are your capabilities and what resources do you have available? What are your strengths and weaknesses? What is your competitive advantage? What will you need to do to grow? How will you shape sales and operations? “Building” your company on paper from the ground up will provide a clear picture of what you want to accomplish.
Thirdly, a business plan forces you to look at the bottom line. Even if you’re opening a non-profit, being able to pay your bills is still important. Dissecting your financials makes you ask how much does it cost to provide your product to the public? That includes labor costs, the costs of goods and all ongoing expenses. What do you need to make in sales to meet that cost? And how many sales make you profitable? Looking at the bottom line immediately pushes you into reality! You confront whether your business idea is doable or not.
Finally, developing your business plan equips you with options in case things don’t go as well, or go better than you expected (which is a nice problem to have, but can also have its own set of headaches). A good business plan is like a road map. It points you in a direction, gives you benchmarks to measure your success and lays out alternate routes, just in case. No, a business plan is not magic and it’s no guarantee of success. A business plan works just like anything else: you put the effort into it to make it good, and it puts you that much further down the road to arriving where you want to be.
Good luck, and let me know if I may be of service.
0 comments - Posted by Tom Markel III at 5:01 PM - Categories: Terry Harrison's Column
