Do I Really Need a Business Plan?
I often get people asking “Why do you teach business planning?” or even “What the heck is a business plan?” Or maybe you are thinking…”Do I even need to take the time to do one…I’ve been fine without one so far.”
Hey guys. Great to see you here again thanks for checking out my blog.
Business plans are awesome because they give you sort of a road map for how you’re going to handle different aspects of your business. Depending on where you are and what type of business you have your business plan can be CRUCIAL to your future or it can be something that’s just there but not really referred to.
I find that who needs one the most, is probably the Emerging Entrepreneur or somebody who’s just getting started in business. Otherwise, somebody who is looking to get a loan or get funding or bring on new business partners. By having a business plan in place it definitely helps investors or banks feel confident that they’ll see a return on their investment. Do consider your business plan to be a too and a pretty important piece to persuade others that working with you or investing in your business is a smart decision.
I’ve run business planning workshops before and the thing that comes up is usually people don’t know where to begin. As long as you have a business idea we can make it into something that looks great and that sounds presentable. A lot of times it’s about just getting good language…sort of like writing a resume. If you’re planning on presenting this to somebody else it really needs to sound clear and make sure you have gone through it with a fine tooth comb. That way you can work out any possible questions that may be asked and have the answer ready.
Here are three main purposes that I feel are important to having a business plan.
#1: Create An Outline of What You Do
A business plan can start out as a list and then get fleshed out from there. Basically it helps to give you a business focus. You can break it down in detail of product or services you know what you’re going to offer to your customers. Details how are you going to do it. Then also gives you an action plan.
Let’s be real..there will be days that you are just working and working and you’re tired and you don’t have the mental bandwidth just to try to figure it what comes next that day. If you have a good business plan and it’s all laid out for you then all the details are already done.
You don’t have to worry “Am I doing the right thing to grow the business, market the business or be on track with my goals?”
Especially in the 1st year to two years of your business when you’re just trying to get things going it’s really valuable to have a plan as a template. It will be great for you and see where you are where you going and also to help you keep perspective of where you’ve been or where you like to be .
Anybody who has a business is looking for investors whether they be Angel investors or Venture Capital type investors. It’s important to secure funding. You can have a great idea but if you can’t make that idea happen because you don’t have the capital then you’re going to be stuck.
Whether you have a service business or a brick and mortar type business, having a business plan is pretty essential if you don’t have a long record of numbers to present as far as how your business has been doing and growing. Many family businesses that keep things pretty casual may find that if they suddenly need a loan to invest in new equipment or build a building would need to have a business plan that includes a financial plan.
#2: Have a Marketing Plan
I love having a marketing plan in place for my clients. It is so important because it helps with setting measurable goals. Goal setting in your business typically isn’t possible unless you have customers. If you don’t have customers, clients, accounts or whatever you call them, then you don’t have business. Regardless of industry, most businesses would agree that the best way to keep your business growth steady is to be advertising or using marketing consistently.
A common pitfall I see with small businesses is that they market inconsistently and do not track results. They say they don’t want to pay for marketing or advertising because they do not see how it is working. Or they try if for a few months, start seeing results and then stop. Then as business slows down then they start doing it again. However, you have to realize there is that ramp up time with any marketing campaign. It takes a few months really to generate good momentum and then once that momentum is happening you don’t want to stop it.
Marketing based on a feeling is not a measurable or predictable model. A marketing plan really helps you to create a set of measurable goals. For example: I want to bring in 20 new customers. That is a number goal for new clients or if you’re looking to sell a certain product. By having those goals, you can also look back and see how effective your marketing campaign was. Did you actually reach the goals? Also having a marketing plan helps you organize your time and your priorities because not everything is needed to be done right now. By having a marketing plan, you can see what is most urgent.
In my business I have consistently hit 20% earnings every year by tracking results and modifying and adjusted until we found a rhythm that works. When you are new in your business you are going to have to do a lot of marketing to generate interest and business. As your business grows then you’ll probably have to modify your strategy…but you will also have more money available to be able to do different things. If you build a business with great customer service and quality right way, later in your business you may not have to do very much advertising at all. People will just talk about you.. and word of mouth is the number one most effective way to get new customers and clients…period.
#3: Create a Financial Plan
Creating a financial plan for your business is pretty important sometimes people just think “I’m just going to start my business and I’m going to go and do the work and the money will just roll in. However as you see in our modern times, things you can not predict will happen. Sometimes there are periods when your service is more in demand or less in demand. Every business will have busy times and slow times. Having a financial plan really helps you look from a place outside of actually in your business to be able to see the big picture.
A financial plan also sets realistic goals and growth opportunities. I’m all about goals and each of my clients also set goals. Whether it be sales goals, marketing goals or new client acquisition goals because you have to have a certain marker for tracking the success of your business.
Hands down, businesses that have goals set up and also have systems in place to be able to reach those goals in a steady consistent way grow more steadily and have a more predictable revenue. Having a financial plan also provides you with logic for sound decision making. If you’re looking at investing in a piece of equipment or some training that can help you reach the next level of your business by offering a new service or product. That is fantastic but if you can’t afford that and you have to put it on a credit card and you’re able to really recoup your investment for six months a year then you’re not ready.
Following your gut feeling to make a business decision is sometimes good…but with spending money you don’t have, it is best to know what is really realistic for paying back. You can also plan for growth more systematically. Knowing your numbers shows when and if you really can afford a new employee or can move to a bigger office and more.
A good financial plan also helps you track your liabilities. Liabilities are debts owed, taxes, anything where you have to put money out. And as all my clients know, I’m all about creating profitable business. So if you don’t know how much money is going out then that’s a big problem. A true profit is the amount of money left over after what’s come in and what has been paid out in your bills and accounts payable and all that
See you next time.