You might pride yourself on being a risk-taker, the kind of person who doesn’t feel the need to plan. And while agility and adaptability are critical skills in today’s business world—especially among small business owners—being reckless isn’t. If you don’t have a plan, then you are risking the health of your business. Creating a business plan can keep you focused, which will help you make better, more informed decisions.
A well-drafted business plan also allows you to quickly convey strategies and goals to investors, partners and even customers. Here are eight reasons why you should start writing your business plan today.
1. Maintain Big-Picture Thinking
A business plan forces you to think long-term so that you ensure you don’t turn down opportunities, miscalculate projections or make mistakes that could cause you to fail. Your plan will allow you to keep the end game in sight.
2. Stay Focused on the Overall Goal
Your love of the business could lead you to make emotional decisions that could ultimately hurt the business. Your plan will keep you and other stakeholders grounded in reality and focused on your priorities.
It becomes even more important as the business grows, especially as you hire more employees and create management positions. A business plan can keep all of those people on the same page.
3. Estimate Profits and Expenses More Accurately
In the course of creating a business plan, you’ll define your market and figure out how much of the market share you can expect to take from competitors. In addition, you’ll calculate your overhead costs, so you’ll have a better idea of how much profit you can expect to make early on.
4. Figure Out Where to Allocate Your Money
Should you rent an office space or open a storefront? How much staff do you need? What technology is critical for you to invest in? You will be forced to think about the bare minimum you need to function and then what investments you need to make to take the business to the next level.
5. Connect With Customers More Quickly
During the process of creating your business plan, you’ll evaluate your customers or would-be customers to discover what they want, how they want you to market to them, what kind of experience they expect, what they are willing to pay and more. With that kind of analysis, you attract customers more quickly and improve the customer experience, which will ultimately lead to more business.
6. Inform Service Providers of Your Goals
If you work with attorneys, consultants, freelancers, accountants or other service providers that handle key areas of your business, you can use your formal business plan to quickly bring them up to speed and highlight your priorities and goals for the business.
7. Calculate the Value of Your Business
You will need a business plan if you want to receive a professional valuation from an accounting firm, business broker or investment banking firm should you decide to sell or ask for capital from investors.
8. Raise Money
Most investors and banks want to see a clear plan for how you will conduct business and generate revenue. A business plan offers you a simple way to share your goals and strategies with anyone whom you hope to raise capital from.
Finally, a business plan tells you if you are making the right decisions regarding your business. With a well-thought-out plan, you’ll feel more confident about the direction in which you are headed. That confidence can mean the difference between success and failure, especially during difficult times.