How important is my Business Plan?
I don't know whether you remember me but I emailed you regarding your website and you gave me permission to reference your work. It is coming along well. I was wondering if you had any statistics on relative success comparing people who created business plans with those who hadn't created plans for their business. I'm just trying to find out how much it helps. By the way I am currently writing my business plan and your site has helped me immensely!
If there's one area of creating a business that I have found entrepreneurs consistently don't get, it's writing a business plan. I even know of entrepreneurs who hire someone else to write the plan, as if it's the final document that's important, not the process (I have written about the problems with that approach extensively too, including at Why successful startups never outsource their business plan).
Not to sound too new-age or anything, but it's the process of forming the business plan that's important, not the final document itself. Sure you want to have a good plan when you're done, one that reflects all your great ideas for your business, savvy analysis of your competitors, accurate and believable financial projections, good executive and founder bios, and so on. But even a mediocre business plan is a ton better than no business plan.
There are a couple of reasons for this, in my opinion. First, by being able to create a business plan, you demonstrate to potential partners, investors and even executive hires that you have thought out all aspects of the business. Indeed, many plans are built upon the MBA fundamental SWOT analysis: Strengths, Weaknesses, Opportunities and Threats. Can you accurately identify all four with your current business?
Perhaps more importantly, though, since you have to go through all the fundamentals of your business -- not your product, not your idea, not your establishment -- then you are forced to face the threats and dangers and address them in the plan. As I said, it's the process of producing a plan that's so darn important to the success of a business.
And a typical business plan will take you at least a few weeks if you're going to do a good job on it. Some parts are a breeze, but others, like having realistic and credible projections for your finances are incredibly tough (and the very first thing just about any potential investor views are your financial projections, and if they're out of the ballpark, you're dead before you start).
Well, let's just say that if you're a small business, or you're just birthing a company, either solo or with a few partners, the time you'll spend developing a solid, coherent business plan will more than pay for itself in corporate strategic and tactical clarity as the company grows.
Good luck! There's little more exciting than trying to turn a smart idea into a viable long-term company!
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