Why Should You Write a Business Plan?

A well written business plan is considered an essential document for a business in all stages of its life cycle.  Ideally, a business plan should be drafted shortly after the initial ideation-stage, it also may be developed just prior to or during the start-up stage.  Even if you did not create a business plan at either one of those points in time, it is never too late for your business to start developing your plan.

Your company’s business plan should be looked at as an ever changing document that should evolve as the business continues to grow and advance.  Over time, your business plan should continue to be altered and modified in order for it to fit with the changes within your business.  Your plan should continue this progression and be developed all the way into the mature-stage and the eventual exit from your business.

There are two main reasons for crafting a business plan.  First, your business plan should act as a guide that defines what your business will do and how it plans to do it.  The second reason to create a business plan is to be able to communicate the prospects of your business to others – both internally and externally.

A business plan should be able to answer the questions of why the business exists, how and where it will operate, how it will find its customers, what is the market for its products and services and who are its main competitors.  It should also describe the back grounds of the management team in a way that demonstrates why the team will be effective in running and growing the company.  The plan may also outline any short comings, or challenges that the business faces and how those challenges will be overcome.

Your business plan should also express clear, quantifiable metrics, or milestones, that are set up to gauge and evaluate how a business is accomplishing its goals.  Without these quantifiable metrics and milestones business owners would have a very difficult time evaluating the performance of their strategies, forecasts and metrics.  These metrics, along with other financial forecasts, will be able to gauge how profitable your business is as well as whether or not your goals are attainable and if they are being met.

Your business plan will not only assist in describing and outlining your business for your internal employees, but it should be able to assist people outside your business as well.  People who are outside your business will generally view your business plan as a signal that your business is a serious enterprise.  This is especially important when seeking capital from outside investors.  A complete, well written business plan is mandatory for instilling confidence in the people who will potentially invest in your business.

Your business plan also acts as your road map to success and is there to assist your management team.  In the early-stages of a company there are always about twenty or more things happening all at the same time.  In order for your business to succeed, the best thing for an entrepreneur to do is focus on the right two or three tasks.  A well written business plan helps to maintain the focus of the entrepreneur on the action items that matter and when those items actually need to be accomplished.

A well written business plan will assist everyone that is involved with your business. It will make sure they all have a realistic view of your business and the prospects for its success.

Remember, your business plan should be created as early as possible within your company’s life span,  and should be considered an ever evolving and changing document.  A current, well maintained business plan will continue to assist people both internally and externally over the lifespan of your business.