The term “business plan” is used a lot like sugar-- it can make anything sound tastier. "Strategy" is also so overused and over-marketed that it’s become hard to nail down a useful definition.
Strategy, in this context, refers to the what-to-do and how-to-do-it of achieving your business goals. And while using the lingo is one thing, actually doing the planning and strategizing is another. Many startups today suffer because their plan isn’t clear or thorough enough to guide the business. Instead their team’s too busy creating products, rallying troops and hunting for clients-- and creating a winning strategy sounds like a lot of fluff when there’s “real” work to be done, right?
Without a clear strategy even the savviest solopreneur gets tossed around and distracted from what really leads to success. That said, let’s get to what you clicked for – brain food & actionable steps. Here are seven reasons to write a business plan and some guidance on getting started. Enjoy!
Recommended: Business planning software can help you write a professional business plan that will lead you to success.
1) Reasons To Write a Business Plan
1) Increase the Odds of Success
Building a business is something to be taken seriously. Tons of startups fail simply because the business owners/managers fail to think things through before plunging into the unknown. We don't want that to be you.
Business requires strategy, proper allocation of resources, refined approaches and squeaky-clean priorities. If you want your business to succeed and grow over time, creating a business plan is a no-brainer!
2) Secure Funding
Funding, funding, funding. Every business needs it and there never seems to be enough lying around. Bottom line, you have almost ZERO chance of getting funds from traditional sources like these without a thorough business plan:
- Banks & Lending Institutions
- Angel/Private Investors & Venture Capitalists
- CrowdFunding Platforms like KickStarter or GoFundMe
All of these folks are going to want to see your business plan before they'll take you seriously.
Put yourself in this position, mentally: pretend you only have a week to prep your business plan before presenting it to an angel investor who's ready to hand you six-figures of debt-free funding. Would you feel confident in what you have to show them? Are you ready?
3) Valuation Purposes
You can’t know how much a business is worth at first glance. Maybe it seems to be doing great on the outside, but the truth is in the numbers-- in its financial health.
This is why banks and investors don’t really care what comes out of your mouth, they just want to see your business plan and skip to the numbers. How are things adding up? What’s the current estimated value and the projected valuation over x number of years?
Your business plan should have all these questions answered, and laid out in a well-formatted document with neat graphs, charts, snippets of info, etc.
4) Market Your Brand
A business needs a solid customer-base to grow, and in most cases you'll need to have a business plan before you can gain a solid audience. You need to create a concrete, hardcopy roadmap to guide you to your destination. Of course, there'll be plenty of unexpected obstacles to deal with along the way-- but without the map, you’ll be completely lost.
A business plan will help you market your business by deepening your understanding of your:
- Marketing Budget
- Core Pitch & Value Propositions
- Targeting & Demographic Data
- Competition & Market Analysis
Unless you have an incredible photographic memory and mind-blowing IQ, odds are you can't keep all this information organized in your mind-- especially if you're trying to run a business at the same time. Modern business planning software is simply essential.
5) Communicate Goals
Let’s say it’s time for your business to expand, to do some hiring and outsourcing.
You want passionate individuals. You want folks with similar work ethic. You want team members that will align with your brand’s culture and help it evolve-- but how to find them?
Your business plan is one concise document you can splice however you want and share with whomever you want. It'll help attract the right talent by spelling out your mission, defining your brand story, and communicating your company culture!
6) Set Management & Employee Objectives
A legitimate business plan includes specific objectives to keep the team and management on target. You don’t need to be super precise here, but rather set some general milestones and leave the micro-management to cloud-based tools like Slack, Google Docs, email, etc.
7) Provide Direction
For most entrepreneurs, a business plan is a pivot-point later on in their brand's development-- once it's absolutely necessary to have one. But why wait? Instead of delaying your concrete planning until after you’ve created a huge mess, hop aboard and update your methodology now.
This doesn't have to be as scary as it sounds. Over the last decade a few companies have totally revolutionized the conventional notion of business planning. Business plan software like LivePlan and Enloop are super streamlined and user-friendly. They make it easy for anyone to start strategizing!
2) How To Get Started
1) WRITE IT DOWN
It sounds like a no-brainer, but most people don’t do it. Start by simply writing down your strategy, even if you're a team of one.
There are several benefits to having a written strategy. It'll help you become more clear on why you do what you do. It'll help you craft your 30-second elevator speech. Most importantly, it will solidify your strategy in your mind and allow you execute it more thoughtfully!
2) MAKE COPY CRYSTAL CLEAR
This is where a lot of companies need the most improvement. The average strategy is too vaguely worded: “We will be the best in class…” “Provide superior service…” “To be the [insert favorite business cliché here].”
A winning strategy has to be specific. If your strategy is to grow by 25 percent in the next 12 months, detail how you plan to make that happen. What niche and communication channels will you use? Which will you avoid? You need to be able to communicate the what and the how.
3) LEVERAGE STRENGTHS
Your strategy should capitalize on what you already do well. Define 3-6 of your company's strengths and make sure your strategy aligns with them.
For example, an event planner would naturally be adept with contract negotiation, schedule planning and coordinating minute details. On the other hand, real estate, maintenance and transportation might be outside the realm of their strengths, and thus should not be part of their business strategy.
4) REGULARLY REVIEW PLANS
I know of a CEO who reviews his business plan every week to make sure his actions are aligned. Every quarter he makes minor adjustments; every year he pulls his team together to renew their strategy. By constantly reevaluating your strategy, you can keep it fresh and applicable.
That said, in a startup it can be tempting to change your plan too quickly. If you made a diligent effort to craft a smart and specific strategy, be patient and give it time to work.
5) ELIMINATE DISTRACTIONS
Don’t allow yourself or your team to lose sight of your goals in pursuit of the latest shiny object. If you’ve put the time and effort into creating an effective strategy, stick to it and let it filter what you choose to pursue and what you let pass by.
Review your strategy and determine whether it's specific enough. If you believe it is, I challenge you to have the courage to let it direct your actions.
3) Need Help? Try Software
We believe LivePlan is the best business planning software on the market. For between $11.66 and $19.95 per month (depending on whether you buy the annual or monthly plan) you get access to their incredible collaboration features, 10 beautiful optimized themes, and much more. They’re also fully compatible with most devices!
Provided you have the data, with LivePlan you'll be able to build a pitch-ready business plan in record time.
Enloop is also another safe, reliable option if you’re looking for high-quality business plan software.
Their free version can be buggy, but it'll help you get a sense of their services before committing to a paid plan (ranging from $9.95 to $39.95 per month). It'll introduce you to some of their awesome features, like their Performance Score, Multi-Currency Support, Financial Ratio Analysis and Interactive PDF Creation.
MEET THE AUTHORS
Larry Nicholson is an accredited small-business consultant and the founder and principal of BluPrint Consultants. His work involves providing guidance and management, product and service assessment, due diligence, leadership, and strategic planning advice to entrepreneurs, business owners, and leadership teams.
Aaron Armour, co-founder of Armour Martin Consulting, has been managing teams for more than 15 years, some as large as 200 employees. He has managed business units with as much as $36 million in revenue and projects with $50 million budgets. Aaron is passionate about helping managers lead their employees and thrill their clients.