Whether you’re starting a small business or exploring ways to expand an existing one, a business plan is an important tool to help guide your decisions. Think of it as a roadmap to success, providing greater clarity on all aspects of your business, from marketing and finance to operations and product/service details.
While some owners may be tempted to jump directly into startup mode, writing a business plan is a crucial first step for budding entrepreneurs to check the viability of a business before investing too much time or money. The purpose of a business plan is to help articulate a strategy for starting your business. It also provides insight on steps to be taken, resources required for achieving your business goals and a timeline of anticipated results.
For existing small businesses, a business plan should be updated annually as a way to guide growth and navigate the expansion into new markets. Your plan should include explicit objectives for hiring new employees, market analysis, financial projections, and potential investors. The objectives should indicate how they’ll help your business prosper and grow.
Grow your existing business. Establish a strategy and allocate resources according to strategic priority. You can find more information about growing your business with a business plan by reading “Existing Companies Need Planning, Too.”
Back up a business loan application. Like investors, lenders want to see the plan and will expect the plan to cover the main points.
Seek investment for a business, whether it’s a startup or not. Investors need to see a business plan before they decide whether or not to invest. They’ll expect the plan to cover all the main points.
Create a new business. Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.
Set specific objectives for managers. Good management requires setting specific objectives and then tracking and following up. I’m surprised how many existing businesses manage without a plan. How do they establish what’s supposed to happen? In truth, you’re really just taking a short cut and planning in your head–and good for you if you can do it–but as your business grows you want to organize and plan better, and communicate the priorities better. Be strategic. Develop a plan; don’t just wing it.
Share your strategy, priorities and specific action points with your spouse, partner or significant other. Your business life goes by so quickly: a rush of answering phone calls, putting out fires, etc. Don’t the other people in your business life need to know what’s supposed to be happening? Don’t you want them to know?
Deal with displacement. Displacement is probably by far the most important practical business concept you’ve never heard of. It goes like this: “Whatever you do is something else you don’t do.” Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.
Decide whether or not to rent new space. Rent is a new obligation, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn’t that be in your business plan?
Hire new people. This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.
Decide whether you need new assets, how many, and whether to buy or lease them. Use your business plan to help decide what’s going to happen in the long term, which should be an important input to the classic make vs. buy. How long will this important purchase last in your plan?
Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.
Develop new business alliances. Use your plan to set targets for new alliances, and selected portions of your plan to communicate with those alliances.
Deal with professionals. Share selected highlights or your plans with your attorneys and accountants, and, if this is relevant to you, consultants.
Sell your business. Usually, the business plan is a very important part of selling the business. Help buyers understand what you have, what it’s worth and why they want it.
Deciding whether you need new assets
Committing resources to capital improvements and new assets such as computers, software or cars/trucks is never an easy decision for budget-conscious small business owners. But a business plan can bring clarity to the process of whether to buy or lease and help determine the optimal amount allocated to those assets. A good business plan can also help you decide if it’s feasible to take on the additional office, retail or workspace.
Creating a marketing strategy
Marketing and market potential are important aspects of a plan for aspiring small businesses. Created primarily as a marketing tool, “My business plan was mostly about market projections,” he said. “How are we going to get those people that lead to an increase in our daily sales? And how are we going to reach them to let them know we’re here?”
Seeking investment for your business
In addition to providing a roadmap for progress and a marketing plan, your business plan could also be important in securing funding. Whether you’re seeking a credit line from a bank or an influx of capital from investors, a business plan that answers questions about profitability and revenue generation can make the difference between whether or not someone decides to invest – and how much they might choose to invest.
Hiring the right talent
A business plan may also be needed to retain other professional services as well, such as attorneys, landlords, consultants or accountants. For a small business to succeed, attracting talented workers and partners is of vital importance. A part of a business plan’s purpose is to help bring in the right talent, from the executive level to skilled staff, by showing them the direction and growth potential of the business. It can also help secure vendor accounts, especially with exclusive suppliers.
Setting objectives for management
Finally, a business plan can be important in providing structure and management objectives to a small business. It can become a reference tool to keep management on track with sales targets and operational milestones. When used properly and consulted regularly, it can help you measure and manage what you’re working so hard to create.
Don’t forget to consider insurance coverage in your business plan. When the unexpected happens, you want to make sure your small business is covered. Customized insurance solutions are crucial to protecting and keeping your operation going. Find out how small business insurance can help you build and protect your business whether you are just starting up or already established. Check out more helpful articles for tips on growing your business.