Nobody should think about starting a business without drawing up a properly written business plan. It’s generally the best way that start-ups can get investors interested in their organization. Some people who finance their start-ups personally might believe that they don’t need formal business plans, but they are very wrong.
Below are ten essential reasons, apart from securing investors, that you should ensure you have a proper business plan.
1. Action planning–At a basic level, business plans are action plans. If your business starts to go off track, you can go back to your business plan and see what remedial action you need to take. You don’t have to follow your plan slavishly, but sticking to the basic outline will keep you on track and make sure you don’t omit any essential areas.
2. Write down your motivation–If you are not positive about what drives you to start a business, writing out a business plan will show you what your motivation is and why you are taking the trouble. As with most things in life, you need to understand your motivation if you’re going to know how you will achieve satisfaction.
3. Decide on your target audience–Most new business owners know what their product or service is going to be but have no idea who their market is. When you write your business plan, you should address everything you know about your target market, research them thoroughly, and then think of the products or services that will be successful with them. Understanding your target audience and their motivations and preferences will also enhance your future marketing.
4. Create a description of your product/service–If you don’t plan carefully, it’s easy to leave the concept of your products or services vague. Writing a business plan will help you decide how you will develop your products or services, starting with a prototype, working through development, and ending up with the finished product. It will help you make many decisions regarding marketing and pricing.
5. Decide who your competitors are–As you develop your business plan, think about whom you are competing with as a start-up, and who your competitors will be when you are more developed. If you understand their strategy and markets, you’re halfway to ensuring that you develop a unique offering.
6. Avoid Mistakes–If you write down your process end to end and map out your business cycle, any mistakes in your planning will reveal themselves at this written stage, allowing you to remove them before they become expensive errors.
7. Detail your procedures–every business must have its operating procedures outlined in advance. How are you going to accept payments, and how will a bill be paid? How exactly are you going to deliver your products or services to your customers? Who are those customers? How will you communicate with them? All this and more should be planned.
8. Detailing your workforce–When you create a formal business plan, it will help you understand the type of workers you require to achieve your goals. You’ll need to sign contracts, arrange to manufacture, find an accountant, and probably a good CPA; finding people who can fulfill your needs is just as important as understanding your needs in the first place.
9. Deciding on your technology–As you write out your business plan, it will help you determine what sort of hardware/software you will require to function effectively. Think about your specific specialty area and what is available to help you achieve your goals. Think carefully about pricing: don’t skimp on your setup, but equally don’t invest in the highest-priced resources when something more reasonable might do the job just as well.
10. Clarify your mission–Developing your business plan will help you analyze your mission, and how and why you are pursuing it. Thinking about these issues will allow you to consider business essentials from day one, ensuring you get off on the right foot.
Hopefully, the above points have given you a good idea as to why it is crucial that you design an effective written business plan as a matter of priority. Even if you start entirely on your own, it’s all too easy to make mistakes or overlook things if you are trying to keep everything in your head. Your business plan will function as your roadmap. When things are going smoothly, it can show you how to stay on that course, and if things start to go wrong, it can show you how to put your enterprise back on track.