Do you need a business plan? What will be the purpose of your Business Plan? Are you seeking funding? Want investors? A new partner? Looking to be acquired or purchase another business? Clarity & Focus?
What many small business owners do not realize is that the business plan is a living document. It shouldn’t be created then thrown into a drawer or on a shelf to collect dust. It takes many hours, days, weeks, and months to create -why create it only to never look at it again. Many very successful companies look at their business plan every month. Why? It keeps them focused and on track.
The biggest lesson any business owner should learn is that it is the process of creating the business plan is more valuable than words on paper. All business owners should go through the process of creating a business plan to understand where they want their business to go. Think of it as your business blueprint. Builders couldn’t build a home without blueprints; you shouldn’t build your business without a business plan.
Here are 5 myths many business owners believe about a business plan...
- We don't need a business plan.
If you are in business, or even contemplating a business, you need a business plan. Success isn't as much about succeeding, as it is about not failing. A properly prepared plan forces you to think through the big picture and agonize over many of the details, before errors in intuition or judgment cost you or your client money, or even bankruptcy. Without it, investors won't invest and buyers won't buy.
- We need a business plan, but not right away.
If you are a Visionary or a Start-Up, you need to begin assembling the elements of a business plan, almost immediately after your "business idea" hits you. The best plans evolve over an extended period, and the less time you give yourself, the less credible the plan. If you are marketing a business, the sooner you present a credible financial picture, the sooner a buyer will consider your price.
- We need a business plan, but we can do it ourselves.
Given enough time, money, and the right skill sets, you will probably be able to generate a credible business plan, maybe even a very good one -- but, at what total cost to your business? Your inspiration, energy, and vision are essential to the success of the plan, but the cost of becoming a business planning "expert" may seriously erode your ability to meet the challenges of actually staying in business.
- We need a business plan, but we can't spend more than "x".
If obtaining financing or attracting a buyer is critical to the existence of a business, then the potential value of a business plan should be the cost of not achieving the goal (i.e, the cost of going out of business). It varies widely, but expect the cost of a professionally prepared plan to be about 1% of the benefit it is capable of achieving (e.g., $10,000, on a financing request of $1 million).
- Thank goodness, we only have to do this once.
A business plan is only as good as the results it predicts. It should be viewed as a living document that requires constant nurturing and revision, as circumstances change and business knowledge improves. Protect your investment, by periodically comparing actual vs. planned results, analyzing sources of variance, and using this information to improve the plan's long-term utility and predictability.
The 3 main types of business plans are; executive (5-8 pages), managerial (20-30 pages), and operational (180-250 pages). There are alternatives to a full traditional business plan. One great alternative is the Business Model Canvas (BMC), which many companies like McDonald's, and Lego use. Their BMC can be found online.
No matter which plans you create, just go through the process to know the blueprint of your business and success.