You’re starting a business. Maybe you’re bootstrapping it yourself. Maybe you’re the sole stakeholder.
Is writing a small business plan worthwhile in your case?
You don’t have to write a formal business plan to reap the benefits of business planning. It can be for your eyes only, as a one-page action plan for what you plan to accomplish over the next month or two.
It can help you prioritize your projects and focus on income-generating tasks rather than spending time coping with distraction, putting out fires or dealing with emergencies.
Here are 15 reasons why you should write a small business plan.
- Big picture overview – Writing a business plan helps you take a step back and look at the way your business operates. Where do you spend most of your time? Where do the bulk of your expenses come from? Are you working productively and profitably?
- Motivation – If you are considering starting a business, a plan can prove you’re serious. Everyone has dreams and wishes, but few take action and commit to their passion. A business plan can reinforce all the reasons why this is the right course of action.
- Confidence – Not everyone in your life may be as enthusiastic about your new business as you are. A plan can give you confidence that your business has a good chance of succeeding. When you can make a solid case for your business on paper and compare this opportunity to other ways to spend your time, attention and money, you can be confident in the business’ viability – especially when things get tough and you may doubt your own abilities.
- Define your vision – Take time to clearly define what your business’ purpose is. Who do you serve? What problems do you solve? How do you get paid? What role does your business play in the marketplace? Work out the details before you start.
- Communication – Most solo business owners are accountable to someone, like family members or their significant other. A business plan can show those most important to you feel this is a worthy endeavor and what you plan to accomplish.
- Prioritize – Every business has limited resources, so choosing one project means turning down something else. What tasks and projects are most essential to your success? Where should you focus your time and resources to achieve your goals as quickly as possible?
- Client acquisition – How will clients find you? How will you find clients? Why will clients choose your business over your competitors? What if they don’t? A business plan can include an in-depth analysis of your potential target market, what they want, and why/how they buy.
- Allocate resources – How will you track costs, monitor cash flow, and manage your time? If you decide to rent office space or hire a new person, it translates into additional fixed monthly costs. It it worth it? Can you justify the cost will bring in more revenue long-term?
- Accountability – As the CEO of your business, you are responsible for any and all success and failures. How will you keep yourself focused on income-producing activities while staving off distractions? What metrics, objectives, and benchmarks do you need to hit each week? Each month? What happens if you don’t hit them?
- Getting help – Professional service providers like attorneys, accountants and business consultants may want to see a model for your business before they agree to work with you.
- Research your market – Business planning can help you uncover your competitive advantages, your key weaknesses, industry trends, possible upcoming threats, and whether your market is growing or shrinking.
- Tracking finances – Do your numbers work? It’s easy to underestimate your start-up costs and monthly expenses while overestimating predicted revenue. What is your revenue model? Is it realistic?
- Manage assumptions – You started your business based on a specific way of thinking. What if your underlying assumptions are wrong? Do you have a Plan B? A date you will throw in the towel if things don’t work? There’s no shame in quitting something that doesn’t work… especially if it leads you to another opportunity that has a better chance of success.
- Uncover new opportunities – Business planning can give you a different perspective on your business. Take time to brainstorm opportunities or problems you face and potential solutions.
- Business valuation – If you need to evaluate what your business is worth, such as in the case of divorce, estate planning, tax problems, or inheritance issues, you will need an in-depth business plan to explain your operations.
Whether you choose to write a formal business plan or a 1-page bulleted list of action steps, deadlines and deliverables, take time weekly to evaluate your success and course correct.