You decided to dip your toes into starting your own business. Firstly, congratulations! For most people, this is the road less travelled. Entrepreneurs are the daredevils of the business world. If you are starting or thinking about starting a small business, I can’t stress this enough, you really should write a Business Plan.
What is a Business Plan?
A business plan is a tool for every entrepreneur, it’s very important for visualisation and as a strategic tool when coming up with a business venture. The business plan is what can be compared to a blueprint when you’re building something in construction.
Sure, you can build something simple like a shack with just the image you have in your head, but as the complexity grows you will miss a detail or two. Unlike constructing something like, let’s say, a house, a business does not stand still. There are a ton of moving variables and complexities, and, unlike a house, a business grows (or shrinks) depending on how you run things.
This is why a business plan is so important. A business plan isn’t just about the now of a business, but it includes a forecast of what “Can Happen” in the future. It solidifies what your vision of the company would be the direction you would like it to take and how it would behave in the future.
So, why make a Business plan? Here are a few reasons.
1) Seriousness About the Business Idea.
Listen, writing a formal business plan is not just a one to two-day job. It takes a lot of time to come up with something worth reading and makes sense to anyone who reads it. This investment in time shows interested parties like investors, partners, and employees that you are serious about what you’re planning to build. It also proves to yourself that you are committed to the idea and want to realise it.
2) Planning Out Milestones.
A business plan involves not just the present, but the future as well. So, like any journey, you need to set up long–term milestones to track your achievements. These Milestones should be significant events in your business. So that you would know how fast your plan is progressing, but also if it’s time to start looking further into the future.
3) Understanding Your Competition.
It’s highly unlikely you have come up with something so unbelievably original that nobody in this world has thought of it before. The same goes for businesses.
No matter how unique your business idea is. It would still have competitors, be it direct or indirect competition. Direct competitors are those that offer something similar to your product.
Let’s say you decide to open a coffee shop. Your direct competitors would be the smaller indie cafés, as well as huge conglomerates like Starbucks and McDonald’s McCafe.
As for indirect competitors, they’re competitors not in the same category as your product/service but can be seen as an alternative. So take coffee again. Your indirect competitor would be any beverage, like tea, water, juices, soft drinks, etc. A business plan would help you understand where you stand compared to your competitors.
4) Understanding Your Customers.
Who are your customers? What do they like? What do they buy? Why do they buy those? What are the reasons why they don’t buy something? A business plan should include a very in-depth analysis of your customers. Understanding your customers is a key part of the success of your business.
5) State Your Assumptions
You know what they say when you assume something that it makes an “A$$ out of U and Me”. While assuming something isn’t necessarily bad, leaving it as an untested and invalidated notion is, especially when it concerns your business plan. Putting these assumptions to paper will help you to identify them and test them out to see if they are true.
6) Knowing Your Financials
Money. I don’t want to sound like an 80s stockbroker, but it does make the world go round, in a sense. For a startup business, it’s important to know how you’ll be making money, how much money you think you will get shortly, what you’ll do with that money, and the most important to a startup. Where you’ll be getting the capital and how much you’ll need to start this business.
7) Attracting Investors, Employees, and a Competent Management Team
A well–written, well-thought-out, formal Business plan is an absolute necessity when trying to convince potential investors to part with their hard–earned money. Think of it this way, a business plan doesn’t just talk about how you start a business, but also how a business ends.
A business plan should include an exit strategy. It’s not being pessimistic, it’s being realistic. Not all startup companies succeed. Heck, not all startups even get launched.
For investors, a business plan will show them that you know your business and the industry you’re planning to enter, and IF things go south you will have their interests in mind and not just bail out and leave them high and dry.
While attracting investors is important, one must not forget that attracting/finding people to help you run your business is equally important. To attract a team that is dedicated to growing your business a business plan is needed, why you might ask.
Well, it gives your team a sense of direction and confidence that you know what you’re doing, and that you have a direction in mind for your business. When your employees are confident in the business and feel secure, they will work harder since they don’t have to think about their job security so much.
8) Feasibility
Starting a business is a huge gambling endeavour. There are a ton of variables at play. Unlike gambling, where the odds are pretty much static.
In business, the conditions always change. Who would’ve thought that there would be a Pandemic that would shut down entire economies? A Business plan won’t be able to predict that occurrence, of course, but it can help minimise other known risks.
By doing your research, you can look at the current state of your industry, from the local/micro level to the global/ macro level. You can ask your potential customers what they want, and get to know them better.
You can plan out what you can do to navigate the times we are in. A business plan if done well. Can shed light if your gamble will have a chance at success. Then, if the risk level is acceptable to your palate, you can leap.
A Business Plan is more than just a sheet of paper, or lines of text on a computer screen. It is the result of time, passion, effort, and money, all to put an idea to paper in the hopes that it can help smoothen out the realisation of a vague concept/vision in the real world. For more Tips and Tricks, please visit, The Lab.
