A business plan is intended to answer the question, “How will I execute my business concept?” Many people ask, “Do I really need to write a business plan?” My stock answer to this question is: you need a plan for your business, but whether you actually write it or not depends on a couple of factors: why you’re writing it and who it is for.
The top reasons people write a business plan:
- To get money from outside investors, a business plan competition, or even savvy friends and family. This option usually requires the most formal approach to writing a business plan. The key here is to know who your audience is and what they will be most concerned about. For example, an outside investor wants to know when they’ll make their money back and how much they will get back. For competitions, it is important to follow their outlines and requirements.
- To attract employees or high-profile partners. When people go to work at a small company, they are most often doing so because they believe in the owner or the idea. A business plan can help communicate the owner’s vision of the company and show future stakeholders that you are serious and have thought through your idea fully.
- To convince yourself that this business is worth your time. If you are going to put your most precious, valuable and scarcest asset – your time – into a business opportunity, don’t you want to make sure it is the right one? And for those of us who have a significant other, we may also need to convince them we’re serious. Having a business plan shows that you have thought through how the business is going to work and that you are serious about making it successful.
The first two in the list are generally the most often cited reasons by business owners for needing a business plan, leaving #3 as a thought that has never occurred to many. Writing an informal business plan that is not shared with anyone and kept to yourself serves to convince you that you are spending your time (and likely your money) wisely. Even if you go through the process and the business plan never makes it off the white board (like one of mine did!), it is time well spent for the following reason:
The process of research and critical thinking that is required to write a business plan is a good exercise for any business.
If you ask (and successfully answer!) the right set of questions, you’ll be better prepared for what lies ahead and more likely to be successful in your endeavor.