The Importance of Creating a Business Plan

If you would have told some of my high school or college classmates that I’d be writing an article about the importance of a business plan, they’d probably wonder if you were talking about the same person.

Naturally, I am NOT a planner. I spent the first 20-something years of my life winging it. I definitely had some pretty embarrassing crash-and-burn moments due to being completely unprepared, but overall, I was really good at it all. The problem was I ended up zig-zagging my way through life. I was led ONLY by opportunity. I didn’t have any plan or guide to keep me on track.

Entrepreneurs fall into that same trap all the time. An opportunity comes up, and suddenly you’ve started a business. Then another opportunity appears, and your whole business model shifts. You run your business on an unpredictable path, driven by opportunity and the possibility of money that comes from it. That might work for a little while, until opportunities stop coming your way and you realize that your business isn’t sustainable. A business plan can help you avoid falling into that trap (among others).

Business plans come in a few formats, but they all attempt to project where your business will be in the future and how it’s going to get there. Whether they are shown to potential investors, possible business partners or you’re the only one to read it, it doesn’t matter. They are a must. I’ve only come up with a couple business plans myself. So, rather than telling you how to make a business plan, I’m going to give you some key questions to ask yourself as you write it. Creating a business plan from scratch is a great opportunity to define what you want your business to be. It’s so valuable to have that information in a tidy, summed up and easily read (or talked about) version. This isn’t something you should do once and forget about it. It should be something you update as your business grows and changes and something you reference from time to time, too!

Is there a market for what you are selling? And what are the people in that market like?
It’s not just a question of whether people like what you have to offer, but do they like it enough to pay you money for it. Do people buy what you are selling once in their life? Weekly? Only during certain seasons? Where do these people live? How much money do they make? You can never have enough of that information.

What is the competition like for what you are selling?
After doing your research, the answer you find may be discouraging. Don’t let that get you down, but don’t throw that info out the window either. The more your know about the industry you are trying to break into, the better prepared you will be. If your industry is super saturated with really talented people and well run businesses, you have some great people you can learn from.

Who is going to be reading your business plan?
For a lot of new entrepreneurs, this probably won’t change the content of your plan too much. We aren’t pitching ideas to possible investors (yet!). But it is SO important that you spend time thinking about who you are going to show your plan to. Even if it’s not an investor, find some folks that you think can give you valuable insight and guidance. These people should be inside and outside your industry.

Is your plan in line with your core values?
This might seem like a no-brainer, but when you are planning, there isn’t a more important time to make sure everything is matching up with your core values. (If you don’t have core values, pick up a copy of Jim Collins’ Built to Last and get a good look at how important they are.)

Does your plan simply describe the uniquenes of your business and the products/services you offer?
The key word here is simply. If you can clearly and simply sum up what is going to make your business awesome and at the same time be successful, you’ll be amazed at how much more you’ll be able to focus your business. Not to mention, you will be able to easily tell people about your business in a way that they’ll understand it. If your business is in a technical field, try to come up with two versions: one that anyone could grasp and one that industry folk will understand.

At what point will your business be profitable AND sustainable?
This will be a guess, at best. And that’s okay. A business plan cannot tell the future, but it should lay out a plan that will give you an idea of when you will be making money, how much you will be making and when it will be enough to be a livable income for you and/or your family.

Do your proposed prices take into account every possible expense?
In your finical planning, make sure you are accounting for every possible expense. Be conservative! This is an area where talking to someone already established in the industry or in a similar type of business is really helpful. They can help you make sure you are accounting for things they weren’t expecting when they first started.

How are you going to get work?
Do your research. Explore traditional marketing avenues and brainstorm new ones. Don’t be scared to ask around. Lay out the different options and when you will try new things if nothing is working. Make sure to take into account that getting work and establishing relationships in an industry takes time. A LOT OF TIME. We are astonished by the work we get from connections we made more than 2-3 years ago.

Who is going to do the work?
You should have an idea of what the workflow of your products and/or services look like. Once you have that, you should be able to figure out how many hours of work will go into each job or order and how many people it will take to do that, at the beginning and as you increase your workload.