One of Benjamin Franklin's famous quotes implies that failing to plan equates to setting yourself up to fail. Regardless of the nature and scale of the business, entrepreneurs need to develop a business plan. Planning brings you one step closer to a successful business venture.
Do you really need a business plan?
A business plan is a document prepared to outline the overall strategies that lead to reaching the business objectives. It contains the mission and vision and the approaches and techniques that the business will implement. Despite its obvious purpose, many may still wonder if they really need a business plan.
These 5 reasons will convince you to invest sufficient time and effort in developing a business plan.
1. Prevents from Steering Away from the Vision and Mission
A business plan embodies and communicates the vision and mission of the company. Businesses are less likely to steer away from the vision and mission as a business plan serves as a guide. A company's mission and vision are important as it states what the business wants to achieve and how it plans to accomplish it. It will constantly remind the entrepreneurs and involved stakeholders of the business purpose and objectives, which can prevent being steered away from the desired results. In a way, it can serve as a roadmap.
2. Serves as a Roadmap
Planning involves creating a roadmap. A business plan serves as a roadmap that can streamline the process of achieving business goals and makes the overall plan easier to understand. It illustrates strategic plans that illuminate the activities and steps entrepreneurs and managers need to perform. In essence, it tells us where to go, how long it will take us to get there, what resources we need, and how to get the required resources to accomplish the main goal.
Where to go
A business plan directs us where to go or what path to take. Zara, for instance, planned to supply the needs of its customers faster than other companies. This statement serves as the mission, which the business plan helps accomplish by outlining the enabling strategies. Zara was able to develop a process that enables it to provide unique and quality fast fashion items faster than its competitors. Thus, a business plan helps get the business to where it wants to be.
How long it will take
Aside from directing where to go, a business plan also reveals how long will it take before we accomplish the goal. The business plan contains marketing and financial activities, among others. Each activity has a duration, which helps forecast when the business will finally progress toward reaching its objectives. For example, a company that introduces a potentially disruptive innovation, that will make lives easier for consumers, may need a shorter introductory phase. As the product has the potential to be well-received immediately by the consumers, the introductory phase doesn't need to be long or extended. The business plan contains information about activities relevant to marketing and operations, among others. Hence, it can tell the readers how long before the business can accomplish its objectives.
What resources are needed
A business plan can communicate what resources are needed to accomplish the goals. As the business plan involves estimations of expenses, it gives an idea of the amount of capital that the entrepreneur needs to secure. It is important to get an idea of what resources can drive the business to success to avoid overspending or wasting efforts on strategies that will not generate positive results.
How to get the resources
Capital generation is an important task for any entrepreneur. The business plan helps determine the needed capital and directs planners to identify ways to secure the amount. To illustrate, the plan gives an idea of how much would be needed to establish the business. This will inform entrepreneurs if they have the means to produce the capital. If cash on hand is insufficient to fund the business, entrepreneurs will be influenced to find other ways such as leveraging, looking for angel investors, and/or offering shares. Considering all these, a business plan guides business owners' decision-making.
3. Effective Decision-Making
A business plan aids decision-making because it determines the weaknesses and opportunities for the business. By identifying weaknesses, the business owner can develop strategies to reduce or eliminate them. Weaknesses impede the successful implementation of business strategies. An example of a weakness is a marketing plan that costs more than the allocated funds. If the capital is insufficient to fund the marketing plan, it can't be fully implemented and the plan will not progress to the next steps. By highlighting the discrepancy, the entrepreneurs can amend the plan or develop solutions to address it.
Further, a business plan can identify opportunities. The process of developing the business plan can help reveal the opportunities that will benefit the business. For example, during the process of researching potential suppliers, the entrepreneur discovered a local supplier that can supply raw materials in a more efficient and sustainable way. It opens opportunities for the business to consider including sustainability in its marketing communications. This will help attract a niche market composed of environmentally-concerned consumers.
4. Establish Stakeholder Alignment
Stakeholder alignment is an important benefit of having a business plan. Establishing stakeholder alignment is among the first steps that an effective entrepreneur should plan. A business plan lets the stakeholders know their roles and responsibilities. However, stakeholder alignment is more than simply letting each party know their responsibilities—it is about getting them on board. It means that stakeholders need to agree on their roles, the business objectives, and the processes involved. A written document can help stakeholders understand what is expected of them. By understanding their roles and functions, entrepreneurs and leaders can easily get them to agree to it. Agreement and alignment to one objective facilitate teamwork and collaboration, which are crucial in realizing a competent workforce. The human resources will be more inclined to achieve the goals set by the company and will collaborate to achieve them. Thus, a business plan is key to human resources effectiveness and business success.
5. Developing a Competitive Advantage
Ultimately, a business plan can help develop a competitive advantage. It enables collaboration and brainstorming that can lead to novel and innovative ideas. A business plan makes stakeholder alignment possible, which means that the parties involved are motivated to share the goals and help the firm reach them. Thus, the stakeholders are more likely willing and generate and share ideas that will benefit the firm. The unique inputs of the stakeholders can help a business to develop strategies that will become sources of competitive advantage. In general, a business plan can get the business to where it wants to be.
Not developing a plan is similar to accepting failure. In line with this, entrepreneurs need to build a business plan. In some cases, it doesn't have to be tedious or complicated. It just needs to embody the vision and mission and serves as a roadmap that aids decision-making. It can increase stakeholder alignment crucial to developing a high-caliber workforce that can share novel and innovative ideas. These benefits can help the business develop a competitive advantage, which can lead the business to success. In conclusion, it is highly recommended to develop a business plan unless you are okay with failing.
Every successful business started by drafting a business plan. Don't hesitate to create one—it's worth all the effort!