HOW IMPORTANT IS A BUSINESS PLAN?
Updated: Oct 6, 2019
If you are starting a business or have an existing business you probably hear often about a business plan but may wonder exactly what that is. In this short post I want to try and answer what a business plan is an why it is important.
Generally speaking, a business plan is nothing more than a written plan describing how your business will be run. I well written plan includes at least the following elements, (1) an executive summary; (2) a description of the business and its core values; (3) a breakdown of the types customers the business will serve; (4) a marketing plan to reach those customers; and (4) the funding needs and sources for the business. In effect, a business plan requires you to focus on your business and address some basic issues that are critical to your business and its sustainability.
While it serves as a roadmap for starting and maintaining your business, it likewise serves as a check on whether you are ready to start your business. Maybe the market for the clients you want is not available in your area. Maybe the funding you need is not available without putting you, and possibly, your family’s future in jeopardy. All of these issues and questions need to be addressed when developing you plan.
According the to website Small Business Trends, as of 2014 only 80% of small business startups make it to the second year and only 73% make it to the 3rd still in business. Many of the issues that lead to the failure of a business are ones that can be addressed and developed in a business plan. They include: running out of cash (addressed in the finance section), poor marketing (addressed in the marketing section), lack of a business model (addressed by the entire business plan) and no market need (addressed in the breakdown of customers and marketing plan sections).
As this information illustrates a well-researched and drafted business plan can help assure a business’s survival. While a business plan is specifically important for a new business, it is equally important for an existing business. All businesses should develop and follow a business plan. The plan should be updated regularly to adjust and adapt to changing marketing and business conditions.
Now that you hopefully see the benefits of a business plan, where do you go to find out more about preparing one? Forms for a plan are available across the internet – just make sure you stick to reputable sources such as the Small Business Administration and Microsoft forms. You can also often get assistance from local business incubators and small business advisory groups. Don’t forget your attorney as a source of information as well.