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Why Do I Need a Business Plan?

Posted on October 11, 2011  |  Written by admin

It’s a question as old as business itself – why should I bother with a business plan when I already know how to make money?

Let’s face it.  Writing a traditional business plan is a bother… nobody loves the reading, writing and arithmetic that go into a plan.  We want to get started.  We want to make some money.  We are a generation of “Just Do It”, and we want to do it NOW!

There are, however, a lot of great reasons to “Just Plan It” before you “Just Do It”.  Not the least of which is that a plan might convince you not to do it at all!  But besides saving you from certain doom, a business plan will help you grow faster, longer and more profitably than any other single thing you can do for your business.

Here’s the 5 key reasons I keep in mind when I’m planning a new business:

1. Slower is Faster
A professional race car driver once told me “You’ve got to go slow to go fast”.   He liked his car analogies so he’d always add, “Before you set out on a long drive, you check the oil, tune up the engine and buy a map.”  Sure, all that preparation slows you down, but starting off with the right equipment is ultimately faster than re-tooling later.

2. Paper Never Forgets
OK, I can hear you saying. “That’s nice, but I’m prepared.  The plan is in my head.” Great!  Now write it down.   A written plan can capture an unlimited amount of detail … and never forget it.  In six months, when your development is finished, will you remember the names of the 27 websites that are available to resell your product?  A great plan can be a reference tool for months and years to come.

3. You Are Not Alone
You need other people to help you grow a business – employees, vendors, partners, investors, bankers, and customers to name a few.  All these people need to understand your ideas and vision.  They need to believe in you, and to know where you are going. A written plan says you are credible – you’ve thought through things.  It sets a clear and compelling goal for all partners to work toward.  How else are you going to get them all pulling in the same direction?

4. Plans = Profits
To me, the most important page of a plan is the financial forecast.  Will your business idea actually make any money?  You won’t know for sure until you add up all the costs.  A good forecast includes staff salaries, rents, utilities, supplies, insurance… and on and on.  Finding customers to pay for a product is easy compared to delivering it at a profit.  Be sure you’ve done all the math.

5. Failure is an Option
The best part of a business plan is identifying all the ways it could fail.  By researching the competition, pricing, markets and trends you will see how you might fail – and how you can avoid failure.  A great plan includes its own “plan B”... and “C” and “D”.  Failure happens.  Acknowledge it, and plan some contingencies.  You’ll be glad you did (and so will your investors!)

Do you still not want to bother with a plan?  If none of these reasons is reason enough to spend a few hours in quiet contemplation, consider the words of Ben Franklin who said “Failing to Plan is Planning to Fail.”  Venturing out into the world deserves action, no doubt.  But action, in turn, deserves careful planning.  You owe it to yourself and you owe it to your new business.

Dedicated to your (Well Planned) profits,
David


David Worrell has started dozens of businesses, and written hundreds of business plans… and he loves the simple business planning power of Enloop!  Check out David’s small biz finance website for help planning and running your next business.