Did you know that more than 35 million people have asked that question on Google? It doesn't surprise me so many individuals are wondering if they really need a business plan because to most aspiring entrepreneurs it simply sounds like a long document with little value and very high cost. However, there something fundamentally wrong with this kind of mindset.
First of all, there's no written rule that says you must hire someone to write your business plan for you, so paying a ton of money is not always a necessity. In fact, if you have the time and resources to do it all by yourself - even better!
Second, there is huge value in a well-prepared full business plan. Practically, your business plan will be the Bible of your business. Today, I'm breaking that down to you to show exactly why you really need a business plan.
#1. Understand Your Vision and Mission
You may know you have a brilliant business idea that's going to help a lot of people or generate huge revenue, but once you write it down you'll figure out it needs quite a lot of polishing before it becomes perfect. The first component of a business plan is formulating your brand's vision and mission. You can't start a business without a clue why you are doing it or just because you want to make money. Writing your business plan will force you to think about this and form your brand's vision, values and mission, which is important for everything else you are going to do in and with your business.
#2. Understand Your Market & Competitors
Starting a business means you have to know the market you are entering and the rivals that are already there, i.e. your competitors. This is essential for your success because it enables you to meet the needs of your consumers in ways that are better than those used by your competitors. It's done through primary and secondary research (in best practices) and it is a major part of your business plan. It is the component that takes the most time and primarily the reason why professional business plans are so expensive.
#3. Understand Your Products and Services
The majority of entrepreneurs think their products and services are wonderful and feasible until they start analysing them. Business plans contain a specific section where you are required to do a SWOT analysis of your brand (products/services). What does that mean?
Strengths - what are the best features of your products/services or brand processes that outdo the competitors?
Weaknesses - what could be the potential downfalls of your products/services, things that can be improved or areas where competitors are doing slightly better?
Opportunities - what is currently happening or about to happen on the market, in the economy, in politics, etc. that can be beneficial to your business?
Threats - what could threaten the performance of your business from emerging and strengthening competition to introduction of new laws?
#4. Plan Your Processes
The research you would have done to understand your market, competitors and products or services would help you to plan your processes correctly. This is essential because the execution of a good business idea can make it either a wild success or a total failure. Writing a business plan will help you identify and follow optimal processes to strengthen your brand, help your business run smoothly and grow.
#5. Plan Your Resources
Weather you are a sole service provider or a product selling business with huge distribution chain you will still have to plan your resources well to ensure your processes will run smoothly. Your resources can be anything from suppliers to employees and freelancers you outsource tasks to. A great business that falls short of valuable resources, soon falls short of sales.
#6. Plan Your Activities
What will you do to make people aware that you exist on the market? How will you persuade them that what you offer is better than anything else out there? How will you compel them to trust you and buy from you? What would be the best channel to sell your brand through? When, where and how will you do certain things and activities to achieve your goals and objectives? All these questions are part of your marketing plan that takes a very important place in your business plan. Many entrepreneurs and established organisations periodically update their marketing plans within or outside of their business plan because market trends change constantly and new marketing strategies have to be created and adopted in response.
#7. Secure Optimal Prices
Having a business plan will help you set your prices to an optimal level. This means they will be high enough to cover costs and provide good margin for profits and low enough for your consumers to afford them and want to pay them. You will get all the data you need to calculate that from the research and planning you've done on all aspects we mentioned so far.
#8. Secure Investment or Business Finance
It is highly unlikely, if not impossible, to obtain a business loan from a bank without a business plan. Same goes for pitching to investors. In extremely few cases an experienced investor will just see potential by the mere explanation of an idea and invest in it. 99.9% of the time, though, if you want to secure investment or business finance, you will first have to present a well-researched and fully-detailed business plan with financial projections and an exit strategy. Which leads us to...
#9. Secure a Way Out
I wish all businesses entrepreneurs start turn into super successful, multi-billion ventures, but in reality, things go south very often. A business plan provides the opportunity to come up with a good strategy to make a failure as less painful as possible.
#10. Keep Track of Your Progress and Stay Motivated
Your business plan will be your main point of reference throughout your business journey. Of course, some of its components will have to be updated regularly due to changing forces and circumstances, but essentially, it will serve you as a tool to keep track of your progress and stay motivated to do what you believe and found out to be beneficial to your venture.
I'm really curious to know how many of you have business plans. It'd be great to hear whether and how you benefited from having one if you do. If you don't, but have questions, ask them below in the comments section. I'll answer all.