When your mind is bursting with new ideas and strategies for your business, it can be hard to organize your ideas and keep one train of thought moving cohesively with another. If you are intent on making your business succeed, you have probably read several books or listened to podcasts from noted entrepreneurs to gain bits of wisdom or insight. You might have come across the need to develop and draft a business plan prior to your start-up processes. Many potential business owners overlook this critical step because of the work and strategy that in entails. However, a business plan is one of the most critical steps of getting your business organized and ready for operations.
Formal vs Informal Business Plans
The reality of business plans is that they can be long and tedious to devise. Formal plans require a tremendous amount of data and depend on projections that have been made concerning your industry and market. The research needs of a formal business plan can be overwhelming for a novice business owner, and it can be harder still to identify what information is useful. When it comes to current theories on the need for a formal business plan, a general consensus is that the businesses which will not be seeking external funding are not in great need of a formal presentation. That is to say, the overall success of the business is not directly impacted by drafting a formal strategy and document. There are many who feel that the time and investment it takes to write a formal plan takes energy and resources from other areas of opportunities. However, it isn’t advised to forge ahead without some sort of strategy on paper. However, being able to write a formal plan for your ideas helps encourage your actions and decision-making to be focused and strategic to the long-term goals of your business. An informal plan relies less on the wording and structure and deals more with the content of the plan. This is a plan that is generally only used for start-up individuals.
Take the Time to Do It Right
Whether or not you feel comfortable writing a formal plan or your idea is to sketch an informal one, there are several reasons why having a business plan is beneficial to your business. This is one of the best tools you can have in your start-up arsenal.
1. It Helps With Financing
Many entrepreneurs don’t have the funding they need to get their business off the ground or to sustain it long-term. Fortunately, there are ways to bring in capital, but the requirements or eligibility criteria can be tough. You have the option of turning to a traditional lender for a small business loan, seeking investment funds from a venture capitalist like Mark Stevens or looking for a business partner. Each of these options will require that you present a detailed business plan. Before anyone will put money into your business, they will want to see the true nature of your business potential laid out in hard data. The business plan is a respected way to present this information.
2. It Helps With Decision-Making
There are things in your business plan that will help you navigate some of the hard decisions that you face in your business journey. Instead of worrying about the gray areas of investment or spending, a business plan presents the black and white goals that you are trying to attain. Deciding on a price point for your products or services is made less difficult when your products and services section of the business plan has been well-written and related to the needs of the market. The business planning process helps establish these boundaries long before you need to make the decision to alter a price or move in a new direction.
3. It is a Reality Check
As mentioned, a business plan can be a time-consuming process, and it will test the resolve and thought processes of a potential business owner. Throughout the drafting period, it becomes more difficult to give words to your ideas that seemed to flow so smoothly in your hear. Your ability to think through each and every detail of operations and management is brought under scrutiny. It can reveal that your idea might not be fully developed and needs additional work. This can be terrifying and overwhelming, but being able to identify these gaps quite early on in the development can save a lot of heartaches later. While it might seem like a step back since it could expose many weaknesses, it can serve to develop your confidence and improve your chances of success before you move in the wrong direction and fail.
It might seem counterintuitive to spend all your time and energy working on something that is just a piece of paper, but this is the most important piece of paper you will have in your new business arsenal. If you want your business to stay on track and be successful, take the time to do it right with a firm business plan.