When you are starting a business, there’s an awful lot to do and most of it is far more exciting than writing a business plan. So, why would anyone bother creating one? There are plenty of other things a start-up must do. In fact, there are many reasons that you should have a business plan even in the early days of a business. Here are FIVE important reasons.
1. Consolidate your business idea
You have a brilliant idea for a business. You have been through the concept in your mind and probably discussed it with friends and family, but does it really make sense? Putting everything down on paper is a great way to organise your ideas and to make sure that your idea really is a business and not just a flight of fancy.
2. Check the business is viable
The only reason to run a business is to make money, so you need to work through all the costs and chart the potential income that it will generate. This includes working out what you can sell a product or service for and what it costs you to make it.
As an example, have you considered turning your hobby into a business? At present you do it for fun and it doesn’t matter that it costs you money. As a business, you will have to cover your costs and generate an income for yourself. You need to work out the costs involved and what you can charge. Writing down the list of all costs and charges and recording what others can sell a similar product or service for will help you decide whether your dream can become reality.
3. Set your objectives and goals
Once you have worked out that your business is viable, you can decide quickly you want to grow your business. Like the viability check, it is worth writing the growth plan down so that you can see what will actually be involved in achieving it. For example, if you aim to turnover £100,000 in year 1 of a £10 product, you will need to sell 10,000 of them and need to work out how you are going to do it. Questions you will need to answer include:
- What resources will you need?
- How will you get these?
- Where do you need to be in 3, 6 and 9 months’ time?
4. Track your progress and growth
This follows on from setting the objectives and goals. You need to monitor how you are progressing with the plans you made in point 3.
We all start businesses in an optimistic mood, you wouldn’t do it otherwise! So, don’t be surprised if you don’t meet all your goals. You might find that you need to change some of them as conditions change or you learn more about the business. It really is worth reviewing your business plan regularly to see that it still makes sense.
5. Raise finance
If you need to raise finance to fund your business, then you are going to need a robust business plan to show to your backers. No one will give you funds on the back of a hand-waving speech – they want to go through your plan to check that they are going to make money out of you.
It doesn’t have to be a large volume
So now, you know why you should create a business plan. It may seem a daunting task, but it’s not as bad as it seems. Yes, you have to have the financial details correct if you want funds, but you don’t need to create a 100 page document. If you do, no one will want to read it and that includes you.
Make it brief and concise. You may be able to summarise it on a single page, if you are lucky, but it may need slightly more.
If you’d like some help from us with this task, then come on one of our “Business Basics” workshops and we’ll take you through the process.