Time is valuable, and time spent writing a business plan can sometimes feel time not focused on immediate business needs such as invoicing or returning client calls.
But you wouldn’t hop in a car for a cross-country trip without a map or directions, with only the hope that every minute you drive brings you closer to the opposite coast — you’ll get lost, take wrong detours, and ultimately, could end up farther from your goal then when you started.
Business plans are just these kinds of maps to keep your business focused instead of scrambling around potential dead-ends.
Here are four reasons why all businesses need a plan:
- Obtain Financing
A bank isn’t going to give you a loan without a business plan. Banks need reassurance that you know what you’re doing, have a good plan to reach your objectives, and understand the challenges involved with your business. Bank officials want reassurance that you won’t default, and that they’ll get their money back. A business plan gives them that assurance.
This goes for any lender, whether you’re angling for major venture capital investments, borrowing $10,000 from Aunt Sally, or convincing your spouse that you won’t drain the family savings account. Having a plan builds faith and good will, and helps show you what you need to work on, and how you can grow.
- Protect Yourself and Your Assets
It’s easy to throw up a shingle and call a business open, but keeping everything safe, legally and financially, takes some forethought. Have you planned for your taxes, what you can deduct, and the new burdens you’ll carry? Has an attorney reviewed your paperwork? Does your bank account align with reality? How will you hire new staff, what will you expect from them, and if you have to let someone go or shift a position, how will you handle that? What does your locality, your state, and the federal government require in terms of reporting and paperwork, even something as basic as a small home office?
Thinking these issues through with a business plan can save future headache.
- Understand Next Steps
You’ve netted a few starter clients via your network, or had a bang-up opening week when everyone and their mother came thorough the doors.
The true test of a business is how the owner has mapped out what happens next to broaden the business reach, grow the local network, find new customers or clients, and bring in steady income — and hopefully, soon, even more.
If you spend a week plotting your next six months, then you can schedule time you need for retention and new sales among all your other duties so you don’t suddenly find your business flagging, and yourself unsure of how to proceed. If you have a spare few minutes, you know what you can do for your business, since it’s already laid out in your plan, instead of just wondering what’s next.
- Grow at a Pace You Can Handle
You’ve got a blockbuster service on your hands. The demands keep coming. How do you sort through it all? How do you prioritize? How do decide where to invest time and money so you can grow? How do you keep your head above water?
Understanding the potential pain points, and how you would need to grow and invest if you hit them, gives you space and guidance to make good decisions and understand the implications of those decisions on your business. A business plan can include milestones where you’d need to hire new people, buy new equipment, seek out new partners, or start saying “no” — or “yes.”
A plan can be the difference between growing at a speed you can handle — or angering clients and stressing yourself and your business.
Creating a business plan doesn’t have to take long. It helps if you can engage an expert to walk you through the process, someone who understands the obstacles you may not have considered, and can ensure you’ve thought of every aspect you might need.
But even if you develop a plan on your own, the important thing is to have one, so instead of worrying about surprises, you can focus on growing your business.