Why are business plans helpful?

Well for some small businesses they help get a loan, investors or qualify for programs. The people who run the banks, investments and programs want to make sure the business is well thought out.  That is will be successful.  The people or person at the top knows what they are doing. There are few areas I believe are even more important than incoming money and a business plan is one of them.

I’m going to start out with one that is a needle in a haystack but can really hurt.  I’m talking a needle that is perpendicular to the floor and you step on it and it goes most of the way in. FIND OUT ISSUES BEFORE THEY HAPPEN. There are many parts to a business plan.  Each area should lead the leader to question “what if?”. What if there are more competitors than you thought? What if you don’t have enough cash to start with? What if the machine you need is more than you thought?  What if a supplier goes out of business?  By answering the questions posed in a simple MS Word Business Plan template the questions will start to come.  Then you can come up with an answer before it happens.

(note from the writer:  I found a photo of a needle in a foot but it gave me the chills.  Sorry no photo here)

A business plan will help you take a serious look at your competitors and realize maybe you need to expand your geographic market. It may help you realize that not hiring your niece right away will help you to keep cash flowing until you have enough monthly income to cover that expense. The analysis included in a business plan will help you identify who will be your supplier, who you would use as a back up and how would their higher prices affect your revenues.

USE NUMBERS TO WAKE YOU UP!  Most small businesses are led by someone who has been in the business a long time and/or have a real passion for the focus of the work.  They’ve lied in bed thinking, thinking, thinking about the business and how they want to do it.  They’ve done the work day in and day out and know how habits can help to oil the machine of day to day operations. But sometimes these positives can become the blinders on the racehorse. Running at full speed but not seeing excess overhead nipping at the right flank or loss of a demographic market ready to trip up the thoroughbred.  By writing business plans that include setting goals, making budgets, estimating cash flow and MEASURING THEM PERIODICALLY, the small business may not notice issues until it’s too late.

Just one more reason, for now, business plans are important.  The world is full of opportunity and those OPPORTUNITIES CAN BE A GODSEND OR A DISTRACTION.  By defining your meaning, knowing your goals and identifying your unique place in the market you have the ability not to be distracted from your plan.  By reviewing your business plan periodically and changing it as you grasp new opportunities, you begin the process again of planning, executing and succeeding in your business.

So, don’t look at it as a requirement of bankers.  Look at business plans as one of the oldest and reliable tools a small business can have.

Happy Analyzing!