Many entrepreneurs are under the impression that with enough enthusiasm and persuasiveness they can start and run a successful small business. This is a contributing factor for more than half of small businesses failing in the first year of operation. There’s a reason that most successful startups- and a number of established firms- undertake this exercise. A business plan provides a number of benefits to the prospecting or newly formed startup, and here are five:
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Banks need it- Try walking into a bank and asking for a loan without a credit check or collateral and see what happens. You’ll be laughed right out the of the front door. Businesses are no different. In today’s credit market, banks are becoming increasingly stingy about lending as risk of default grows. It is your responsibility to provide in-depth, well researched data to ease this concern if you expect them to provide funding.
You need to know your market segment- Grand plans to outsell Amazon.com are fine and dandy, but the truth is that you will need to start small. If you are entering an industry that has growth potential, there are probably already a number of competitors present who are thinking the same thing. You need to know where your business will fit in the competitive landscape, as well as how you want to be perceived. Will you be a low-cost leader? Offering premium products or services? Know where you’ll be carving out a piece of the market will help you build a long-term strategy.
It’s your instruction manual- Every piece of information you need to sell your company to the outside world is in that document. Sales forecasts, target market size, startup cost estimates, short- and long-term strategies- these are all found in the business plan. It will serve as a constant reminder of what you’re doing and why.
It will keep your ego in check- If you’re like most entrepreneurs, there are a thousand ideas running through your head about how to improve your business. These ideas are often muddled when undertaken too early or in addition to other work. Having a plan for strategic implementation, along with descriptions of how and why they are listed in a particular order, will prevent you from biting off more than you can chew. Yes, they are all good ideas. And yes, randomly picking one to implement is a terrible idea.
You might want to retire someday- A blueprint for a business is a necessity for a sale. It documents the business and allows you to communicate the essence of your operation to the intresed aquirer. While a business plan seems like a lot of work (who has time to write thirty pages?), it is one of the most strategically important decisions you can make as a business owner. Whether you’ve just bought your first domain name or have been in business for 20 years, having a document that defined the scope of your venture is an invaluable tool. It will keep you focused on your priorities, help your employees understand how to become more efficient, and provide outside contributors with an understanding of your needs.
Banks need it- Try walking into a bank and asking for a loan without a credit check or collateral and see what happens. You’ll be laughed right out the of the front door. Businesses are no different. In today’s credit market, banks are becoming increasingly stingy about lending as risk of default grows. It is your responsibility to provide in-depth, well researched data to ease this concern if you expect them to provide funding.
You need to know your market segment- Grand plans to outsell Amazon.com are fine and dandy, but the truth is that you will need to start small. If you are entering an industry that has growth potential, there are probably already a number of competitors present who are thinking the same thing. You need to know where your business will fit in the competitive landscape, as well as how you want to be perceived. Will you be a low-cost leader? Offering premium products or services? Know where you’ll be carving out a piece of the market will help you build a long-term strategy.
It’s your instruction manual- Every piece of information you need to sell your company to the outside world is in that document. Sales forecasts, target market size, startup cost estimates, short- and long-term strategies- these are all found in the business plan. It will serve as a constant reminder of what you’re doing and why.
It will keep your ego in check- If you’re like most entrepreneurs, there are a thousand ideas running through your head about how to improve your business. These ideas are often muddled when undertaken too early or in addition to other work. Having a plan for strategic implementation, along with descriptions of how and why they are listed in a particular order, will prevent you from biting off more than you can chew. Yes, they are all good ideas. And yes, randomly picking one to implement is a terrible idea.
You might want to retire someday- A blueprint for a business is a necessity for a sale. It documents the business and allows you to communicate the essence of your operation to the intresed aquirer. While a business plan seems like a lot of work (who has time to write thirty pages?), it is one of the most strategically important decisions you can make as a business owner. Whether you’ve just bought your first domain name or have been in business for 20 years, having a document that defined the scope of your venture is an invaluable tool. It will keep you focused on your priorities, help your employees understand how to become more efficient, and provide outside contributors with an understanding of your needs.
by Jason Diperstein
Slainte
Gordon
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