There have been a lot of debate over the last decade in the business world about the importance of a business plan. Not being a traditionalist I tend to lean on the side that says a “traditional” business plan is not needed unless you’re trying to raise venture capital. However being a dreamer, and goal setter I believe that businesses whether they are big or small, for-profit or non-profit benefit from a business plan.
At a recent networking event I was surprised to hear a few of my colleagues say they did not have a business plan.
Entrepreneur Magazine had this to say, a business plan is much more than a fund raising tool: It’s a tool for understanding how your business is put together. You can use it to monitor progress, hold yourself accountable and control the business’s fate. And of course, it’s a sales and recruiting tool for courting key employees or future investors.
Writing out your business plan forces you to review everything at once: your value proposition, marketing assumptions, operations plan, financial plan and staffing plan. You’ll end up spotting connections you otherwise would have missed. For example, if your marketing plan projects 10,000 customers by year two and your staffing plan provides for two salespeople, that forces you to ask: How can two salespeople generate 10,000 customers? The answer might lead you to conclude that forming partnerships, targeting distributors and concentrating on bulk sales to large companies would be your best tactics.
As part of your operational plan, you’ll lay out major marketing and operational milestones. When you’re the founder, the only person holding you accountable to those results on a daily basis is you. So your plan becomes a baseline for monitoring your progress. If your prototype was to be complete by February 1, and it gets done early-on January 10, for example-you can ask yourself why. Was there an unexpected breakthrough? Did someone put in a heroic effort? Or did you just overestimate? What you learn will help you do an even better job next time.
But even more than a tool for after-the-fact learning, a plan is how you drive the future. When you write, “We expect 100 customers by the end of year one,” it’s not a passive prediction-you don’t just wait for the customers to show up. It becomes your sales force’s goal. The plan lays out targets in all major areas: sales, expense items, hiring positions and financing goals. Once laid out, the targets become performance goals.
And of course, a well-written plan is great for attracting talent. When a prospect asks to understand your business, you can hand them a plan that gives them an entire overview. Their reactions tell you something about how quickly and thoroughly they can think through your business’s key issues. Plus, the written record of your goals coupled with a track record of delivering against those goals sends a message loud and clear: You understand your business and can deliver the results you promise. Great employees will respond to that message-as will banks and investors the next time you need to raise money.
So viewing your plan as a fund-raising tool is just the beginning of the story. You’ll use the plan for so much more-for managing yourself, for operating the business and for recruiting. Before deciding to skip your planning phase, consider all the implications and what they mean for your future success.
I believe it is essential for every business to put on paper the vision, mission and goals of the organization and to make sure the plan is shared with every single stakeholder.