5 Reasons You Need a Business Plan
Did you know that approximately 70% of business owners do not have a business plan?
This staggering number comes from a study conducted by Harvard Business Review. A separate study by award-winning chartered accounting firm HLB Mann Judd suggests that this number could be even higher! Their study reports that 4 out of 5 companies don’t have a formal business plan.
While most businesses might not have a plan, it’s also true that most startups fail.
In fact, according to the Small Business Administration, 90% of startups fail within 10 years. Out of that number, approximately 21.5% will fail within their first year.
And this was before the pandemic!
Things have certainly gotten more challenging since COVID-19 began.
So this raises the question: could there be a correlation between having a strategic plan and success?
Or phrased another way: are businesses that don’t have a plan more likely to fail than their counterparts?
Before we dive into these questions, it’s important to understand why some people don’t have a business plan in the first place. Some start-up companies are founded from the “heart.” For example, someone may have a passion for cooking, hairstyling, or watching kids. Their passion organically gains them referrals and before they know it, they have a business. They haven’t had the time to sit down yet and plan the process.
Other people simply “wing” it. They don’t understand the importance of a business plan and they make decisions as they go. However, without any plan to guide them, they find themselves struggling as unexpected challenges arise. Whether you’re thinking about starting a business or are looking to grow your small or mid-sized business, it’s critical to have a business plan to take you to the next level.
Here are 5 reasons why taking the time to invest in a business plan is so crucial to success:
It’s nearly impossible to get funding without it. If you want to grow and scale your business, chances are that you’ll need significant funding to make that happen. Whether this comes from investors or from a traditional bank loan, both bankers and investors will want to see a business plan before giving you money. The people investing money in your business will want to have the confidence that they can recoup their assets. A strategic, well-thought out business plan provides this confidence.
A business plan counterbalances your emotions. Having deep emotions is part of the human experience, but when it comes to making business decisions, it’s important to have an objective mind. For many business owners, their company is like family. In fact, it’s not uncommon for owners to refer to their business as their “baby.” You’ve invested blood, sweat, and tears into your business, so you want to see your business succeed. Unfortunately, this emotional investment and passion can make it difficult to think objectively. Let’s go back to the “baby” analogy. Does anyone ever think their baby is ugly? Of course, not! Similarly, it’ll be difficult for you to note all of the weaknesses in your business. Taking the time to draft a plan forces you to confront those realities. Here’s the good news: a business plan isn’t just about noticing all the weaknesses. It’s also about creating an action plan to address those areas of improvement so your business can perform its best. You’ll be better equipped to improve it and scale when the time comes!
You’ll always be a few steps ahead. Would you rather run into a problem during the planning phase or while you’re actively scaling? Putting a business plan on paper forces you to think several steps ahead. What will your location(s) look like? Inventory? Employees? You’ll be able to think through potential pitfalls and problems so that you can avoid those road bumps. As you take time to strategize what the future of your business looks like, you may also find that this unlocks more creativity. You’ll be in the zone ‘brainstorming” and these ideas will help strengthen your business immediately!
It provides a way to monitor progress. During this process, you’ll want to set goals and objectives. One of the key components of successful goal setting is to ensure that these goals are time-bound. When you put something on paper, you’ve created a benchmark to assess your overall performance and business operations. Are you ahead of schedule? Is the business in better shape than you thought it would be at this time? Worse? Is there any way to get back on track? Just as employees have annual reviews, having goals and objectives in your business plan allows you to assess your company’s progress year after year. Fortunately, no business plan is stagnant. You can always revise and adjust your plan as the years go by, ensuring that your objectives and business’s health are always at the forefront.
You’ll better understand your competitors. Sometimes to look inward, you have to look outward. No business is an island. You’re always floating in a sea filled with competitors. When you create a business plan, you’ll be forced to have a strong handle of everything that happens in your industry locally, regionally, nationally, and internationally. Writing a business plan will help you understand your competition and the market. How does this help you? Well, for starters, you’ll be better equipped to differentiate yourself. You’ll also be able to spot potential consumer trends so that your company can benefit from a shifting landscape. Some trends and potential disruptions aren’t always visible, so taking the tie to understand your market is key to sailing the smoothest business waters possible.
Have you invested the time and energy to sit down and craft a business plan?
Or maybe you already have a business plan, but have you taken the time to re-evaluate it and see how your business measures up today?
The economy and markets have never been more complex and competitive.
Having a well-thought out business plan can help reduce stress while also setting the foundations for long-term growth and success.
If you’d like to learn more about what a business plan for your company might look like, schedule a free consultation with Exceptional Services today! We would love to hear from you!
Simply email firstname.lastname@example.org or call 504-533-8859.