Operating your business without a business plan is like going to the grocery store hungry and without a list.
You end up with more than you need or want in your cart. On top of that, now you’ve upended your budget. Just a few carefree errands like this and your whole monthly financials are out of balance.
Like a well-planned and budgeted grocery list, a business plan helps keep you on track, and the beginning of a new year is a great a time to dive into creating or updating yours. A lot of business owners think a business plan is something to do before they start their business and then never really update or look at again. But the better way to think about it is as an annual strategy exercise. Updating or re-creating your business plan at the beginning of each calendar or fiscal year gives you an opportunity to reflect on what’s working and what’s not, if you have new ideas, if anything within your business has changed or grown in the past year. You can review financial and funding information, products or services, competitive research and analysis, marketing plans, sales plans and projections, and information about key people in your business and their roles.
You may think your business is too small, or you’ve been doing it for too long to need a business plan. But no matter the size, structure or age of your business, the exercise and discipline of maintaining a business plan can provide much-needed structure, strategy and even motivation for you and other partners or key stakeholders. However, this tool can only work if you truly dedicate the time to writing a comprehensive plan, and stick to an annual evaluation of it for review and updates.
Structure and Organization
Business owners tend to keep a lot of their ideas and reflections all in their head. But the exercise of writing out the details of your business and seeing them in print can reveal unnecessary duplication, gaps or inefficiencies. With this information, you can reallocate resources as needed. Proactively addressing these structural issues before they manifest as problems keeps your business running smoothly and efficiently. And since all businesses need cash to survive, this planning should also include forecasting work or sales as well as expenses so that you have a long-term and short-term revenue goal. This will help keep you on track when tempting or unanticipated opportunities arise.
Validation and Motivation
If you create a business plan that you reference at least once a year, you are able to see how well you met your goals, validate certain ideas or show you where you may have over or underestimated other items. This is useful data when it comes to growth and pivoting where necessary. Whether the business is meeting its targets or falling short, having that data and analyzing it on a regular basis means you can spot trends and take action.
For example, consistently hitting sales targets may mean it’s time to evaluate an expansion campaign or to re-evaluate and trim the marketing budget. Consistently falling short of sales targets may mean the goals are too ambitious or perhaps the sales team needs an additional resource. Working with fresh data provides you with the opportunity to take timely, corrective measures. If the data reveals an issue, it’s much less overwhelming to correct a slight deviation in course than to be forced to re-chart the entire course. On the other hand, when the data reveals growth, striking while the iron is hot to capitalize on that growth fuels the business with positive momentum.
Your business plan needs to cover a wide breadth of topics in thorough detail. The Small Business Administration provides an excellent starting point for collecting the necessary information and beginning the writing (or updating) process:
When you begin to write or update a business plan, consider your audience. If the business plan will be an internal document, you may be able to handle the process yourself. However if your business is looking at taking on partners, investors or additional financing, you may want to bring in a professional business plan writer to take your draft to the next level. Consider consulting with your business planning attorney and your tax professional to gather and discuss some of the necessary information.
The fact is that companies with written business plans perform better. Writing and maintaining a business plan can be challenging work, but the benefits greatly exceed the time and effort you put in. While some business owners are comfortable writing their own business plans, many business owners discover significant benefits after working with a business planning professional. If you’re ready to consult with an attorney who is experienced in business law, finance and planning, we would love to talk to you about how we can help. We provide business planning services for the complete business lifecycle, including shaping initial ideas, deciding upon and implementing the right legal structure, crafting a comprehensive business plan, and more.