Many business owners frequently ask the question -Why create a business plan? A business plan is a necessary foundational step in the journey of every business. It forces a critical evaluation of every area of the business. Moreover, it defines the customer, product or services, market size, biggest competitors, operations, management structure, marketing plan and financial plan. It also helps determine how much money you need to invest on any gaps identified. It is also a document that will help your business grow – if you frequently reference it and use it as your GPS.
While creating a plan that works for you is recommended, there are certain essential details that you should include – Essentials of a Business Plan
Why Create a Business Plan?
A simple illustration will serve to highlight the importance of creating a business plan.
Assuming you take your car in to a mechanic workshop.
The mechanic checks the car, and you ask him what is wrong with it. He says he does not know.
You ask him what he will do to check for the problem. He says he does not know.
4 hours later, he is still fumbling around with no clear destination in sight AND he still does not know what he is doing.
The mechanic continues to use random tests to check the vehicle, and you ask him if he knows what he is doing. He says he does not know.
By this time, you are frustrated, and you request to take your car elsewhere.
Many small business owners without a sound business plan operate like this. There is a lot of fumbling and trial and error going on. It is easy to see why their few customers can feel frustrated and decide to go to the competition.
The absence of a business plan and necessary strategic planning causes self-inflicted business chaos with the need to put out constant fires. (Remove Chaos in Business. How to Use Visionary Planning).
A business plan develops strategic planning that identifies where the business owner is now, where the business owner is going, and how the business owner is going to get from the present state to the desired future state.
Major Payoffs When You Create a Business Plan
- Identifies the Vision, Mission, and company values
- Identifies the business core strength. This serves as the driver for operations and services
- Defines success. Helps establish a clear vision of path to success and the key measurements of that success and growth.
- Defines short-term, and long-term goals. Helps assess whether the current business direction, operations and metrics will achieve short and long-term goals. A sound strategic business plan provides clarity and removes confusion with making important business decisions.
- Defines clear responsibilities and accountabilities.
- Identifies leadership, skill, or relationship gaps and creates action plans to fill these gaps and increase productivity.
- Identifies the key employees. The business owner can align their roles in a way that will maximize the productivity of the business
- Identifies required business activities. Removes business overwhelm from non-value adding activities that will not affect the goals for business and personal success.
- Sets the framework for developing management systems and processes. Core business activities are developed in appropriate systems and processes to accomplish business goals.
- Consistent results are delivered. With a systemized business, results each month can better be analyzed and interpreted, for good business decisions to be made.
Problems Created by Lack of a Business Plan – Infographic
Without a sound business plan, various issues arise that can hinder growth because of self-inflicted business chaos.
Conclusion – Why Create a Business Plan?
Why create a business plan? It provides clarity and direction for a business by identifying both short- and long-term goals. Implementing these goals in a focused manner will ensure success.