Why Is It Worth the Time and Effort to Create a Business Plan?
Are you considering approaching a bank for financing to help your business? If you haven't already met with the Manager, you may be surprised to learn that the first thing he'll want to see is your Business Plan.
Perhaps you are not persuaded that the time and work required to prepare a strategy is worthwhile; if so, here are the primary advantages for both you and your organization/Business.
1. No matter how brilliant a communicator you are, nothing will ever be able to explain your vision for the business as effectively as a well-crafted Business Plan. It gives you a clear picture of what you want to accomplish. It enables you to convey your thoughts more clearly.
2. Too often, business owners attempt to sell their idea verbally, and by the end of the interview with the bank, the Manager is no wiser than he was at the beginning. You can probably anticipate the outcome of many of those demands!
3. A Business Plan will assist you in convincing both you and the bank of the feasibility and viability of the enterprise. There's nothing like having all of the data in front of you to help you understand the main issues.
4. It's impossible to deny that a business owner who plans comes across as more ambitious and dedicated. A well-written Business Plan reveals that you have a vision and know what you want.
5. When you have a lot of thoughts swimming around in your head, the hazards or stumbling blocks to achievement are never obvious. A mind that is bustling with thoughts will rarely reach clarity. A Business Plan encourages you to put your ideas in writing and in a logical order. This could lead to you taking a very different path than you had planned, or perhaps abandoning your concept entirely. It's not a pleasant concept, but which would you rather have? Is it better to lose your hard capital or to reconsider your idea?
6. It is an excellent tool for tracking progress toward the goals you have set for yourself (we will cover objective setting later). By comparing progress to your plan, you will be able to see if you are straying from your initial vision and will know what has to be corrected.
7. Consider what would happen if you didn't have this check-in in place; an unnoticed shift in the course or a lapse in meeting your goals, if left uncorrected for too long, might be devastating to your firm. On the other side, it may turn out that a deviation from your initial vision is a better option, but identifying this shift allows you to adapt your course in a planned, structured, and controlled manner.
8. Every action you perform has a consequence, and a Plan helps you clarify these repercussions. Being aware of the potential consequences of your chosen path allows you to plan ahead of time, leaving you more prepared to deal with whatever the world of self-employment may throw at you. This is something that "mental planning" will not do.
9. Putting your ideas on paper may lead you to recognize that you need to conduct further research on the demand for your product or service. It may also indicate that more research about your competitor's products or services is required. Additional study could help you avoid a potentially costly mistake or even unearth a previously unknown advantage!
10. A plan will help you determine how much money is required to make a concept a reality. You may have an idea of what you'll have to commit in your head, but until you do a Cash Flow Forecast, you may not understand that an overdraft limit, in addition to a loan for your equipment, would be required. If the mere notion of creating a Cash Flow Forecast causes you to break out in a cold sweat, don't worry; I'll show you exactly how to do it later in the book.
11. A Business Plan will assist you in obtaining funds. One of the biggest reasons banks decline down loan requests is a lack of information to help them make an informed choice. If the Manager does not understand your idea or business, he will not feel comfortable enough to help you. Before he can say yes, he needs to understand your business. He may have to justify his judgment to his superiors at some point in the future, so he wants as much information as possible to back up his decision. A Business Plan will put him at rest and allow him to say yes more often.
12. By the end of your Business Plan, you will have a thorough grasp of your company's strengths and weaknesses, the environment in which it operates, what could potentially go wrong, and what you can do to ensure success. Doing your planning on the back of an envelope will not get you there.
You should realize by now that having a Business Plan is critical; it might be the difference between success and the dreaded "f" word - failure! It all comes down to understanding the significance of planning.
Spend time writing down your ideas in a logical and ordered manner. It will pay dividends in terms of convincing the bank to take you seriously as well as guaranteeing your company's future.