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You can find it in a variety of forms and formats, with step-by-step instructions on just exactly what kind of information such a document should contain. There are software applications like BizPlan Pro, there are websites like the American Express Small Business Center, there is personal counseling such as that offered by SCORE volunteers, and there are countless books available on the subject.
Among all the instructions about how to write a business plan, there is very little about why to write a business plan. More often than not, when the sources mentioned above give a reason for this exercise at all, they usually tell you that you need to write a business plan if you want money. That is, if you are on the lookout for any form of funding, this is one of the pieces of documentation you will need to present to the well-heeled folks you plan to approach.
And that’s true, too — to a point. But it’s also misleading. It implies that the only reason to write a business plan is for show. It also implies that you don’t need to write a business plan unless you’re looking for funding.
That’s a bill of goods. Don’t buy it.
The fact is, you need to write a business plan long before you start looking for money. In fact, you need a business plan as soon as you decide that you are running a business (as opposed to a hobby, or “just a little something to bring in a few bucks”). If you want your business to grow in size, in market share and/or in net worth, you need to do this.
It’s that simple. If you want to run a business, you need to make a plan.
I’m sure that at this point a lot of people would argue with me. They — or their sister, or their boyfriend, or their husband — have been running their little microenterprise for years, and they haven’t produced a business plan. Clearly, they don’t need one.
Well, yes. But if they’ve been running their microenterprise for years and it’s still a microenterprise, it may be that the reason for that is because they don’t have a plan. The fact is that you can putz along forever like that. It may even be that you don’t want your microenterprise to grow any larger than a microenterprise, in which case I guess it’s true that you don’t really need a plan. You’ll probably make a few dollars, but you probably won’t grow much and you almost certainly won’t have an enterprise that is worth much of anything to anybody when you decide you want to retire.
It’s even possible to stumble onto success without having made any plans of any kind. But the odds are against it.
You see, as much of a hassle as it sometimes is, the simple act of writing up a business plan changes the way you think. That has to do with the kinds of things you will need to look up, research, think about and figure out in order to do it.
When you write your business plan, you have to write down what your product is, who would want to buy it, why they would want to buy yours instead of somebody else’s, who that “somebody else” might be, how big their share of the market is, and how you plan to capture some of that market share.
You have to write down how your company is going to make money. That may seem like a simple procedure for somebody who is in retail sales, but not when you take into account things like planning to expand product offerings and when that expansion should take place. And, when you are in a service business or in something a bit more amorphous like, say, online publishing, figuring out what your revenue streams will be can be even more challenging.
Instead of going around blindly hawking your wears or pitching your product at every opportunity, you have to plan a marketing, promotion and advertising strategy. You have to demonstrate that you know who your customers are, where to find them, how old they are, what their gender and marital status is, when and why they buy things, how much disposable income they have, and why you have reason to believe they might be willing to part with some of that disposable income in the face of your product.
You will also have to sit down and really crunch some numbers. You’ll have to figure out just how much it will cost for you to do everything you’ve decided you want or need to do to move your business in the direction you want it to go. You’ll have to make income projections, which will behave like goals that you set for yourself about how much money you will need to make in order to implement the next step in your overall plan.
Ultimately, when you are finished writing your business plan, you will have had to figure out just what kind of business you are going to be running.
And once you have done all that, you will find that the things you have discovered about yourself, your goals and your business will begin to effect the decisions you make on a day-to-day basis.
You’ll find there will be certain marketing ploys that you won’t choose to use because you know who your market is and you have reason to know that that won’t work for them.
There may be certain PR opportunities that you’ll decide to pass by, and even perhaps certain income opportunities that you’ll turn down too, if you think it will create a reputation for you that will hurt your plans or take your business in a direction in which you don’t want it to go.
Your financial management decisions will be a bit easier, since you will have decided just what you want to do and when. Are you saving up to make a down payment on new equipment, planning to expand your inventory, planning to hire staff? Perhaps your plans have advanced to the point where you need to do some professional development, budget for trade conferences, network in certain circles that will entail business entertaining? Budgeting decisions, too, will be effected by where you are at any given time on the road you have mapped with your business plan.
In fact, you’ll be much more decisive about things in general, because you’ll know just what you need to do, because you’ll know just where you want to go.
Even the most informal of plans can help you when you are floundering. Let me give you just one example.
I have a friend who started an online business, sort of stumbled into it, actually. He made some sales, got a little bit of website traffic, had the business paying for itself — of course, it wasn’t costing all that much to begin with — and possibly could have gone on like that indefinitely. Then one day, for a variety of reasons, he and I sat down and crunched some numbers and answered this question:
If you didn’t have to worry about money or success or failure or anything else, what would you do with this business?
He answered that question and we sat down and crunched some numbers and did some research and discovered that what he wanted to do really was do-able. He got on it immediately, because once he saw that it was do-able, he got really excited about it. It’s a good plan, too, with a viable market and sound revenue streams built into it. I think he’ll do really well with it.
But, you see, it never would have even started happening if he hadn’t sat down one day, vaguely dissatisfied, and made some plans based on where he wanted to take his business. And he never would have been able to do that if he didn’t know where he wanted to take his business.
You have to know where you’re going. You need a plan, a roadmap for your business, so that when you get to the many forks in the road ahead, you can take the branch that will lead you where you want to go without hesitation. Of course, there’s nothing wrong with getting lost. There’s nothing wrong with stopping to ask directions, in the form of acquiring a mentor or doing some constructive networking to learn what you can from the experiences of other businesswomen. But none of that will help you if you don’t have a goal.
Without a clear vision of your own brass ring, there’s a very good chance that you won’t recognize it, and grab it, when you see it. And that would make the whole exercise kind of pointless, wouldn’t it?