The Importance of Being Earnest: Why You Need a Business Plan
The single greatest error many entrepreneurs make is to launch a business without a business plan.
Dwight D. Eisenhower famously said that “the plan is nothing, but planning is everything.” Eisenhower understood that, while the plan is everything before the battle begins, once the shooting starts it becomes worthless. Nevertheless, he appreciated the indispensable value of the plan and the exercise of planning. At its centre, the plan defines the mission. And that’s the most important thing. Here’s our top five reasons why you should prepare a detailed business plan for your venture.
1. It shows you’re serious
To be successful in business, you need to be serious in your intention, purpose, and effort. You need to have a deep and sincere passion for your venture. Both you and your business need to command serious attention. In short, you need to be earnest in both your character and your endeavour. Preparing a detailed, comprehensive business plan is the best way to demonstrate your earnestness, enthusiasm, and commitment to growing your business to others (including business partners, investors, and employees) and perhaps most importantly, to yourself. If you’re not taking yourself seriously, why should anyone else?
2. It provides a roadmap for your business
Preparing a business plan helps you establish a detailed roadmap for your venture with mission-critical goals and success criteria. It clearly establishes your mission, charts your course, and tracks your progress against milestones. The process of preparing your business plan will expose assumptions about your venture and provide an opportunity for critical analysis and assessment. It will focus your short- and long-term vision on your destination, the main routes to get you there, and the detours you may be forced to take along the way. It will provide you and your team with concrete metrics, against which you can measure your success. Without a business plan, you may be tempted to shift your strategies and tactics to react to short-term imperatives and lose sight of your long-term goals.
3. It provides a critical Q&A about your business
A business plan is a valuable tool to examine questions regarding your business and its market. Preparing your business plan will enable you to gain an in-depth and holistic understanding of your venture. Important considerations include operational requirements and hurdles, staffing needs, customers and purchasing habits, sales channels, marketing requirements, costs, and requirements for financial success. Writing your business plan will compel you to research and understand your target market. What is the size of that market? What trends are shaping it? Is it expanding or contracting? What are the greatest threats and opportunities? Who are your major direct and indirect competitors? What are your competitive advantages? What is your brand position? You’ll be surprised by how many questions are generated by the process of preparing your business plan, and you may be shocked by how much you didn’t know that you didn’t know. By tackling these questions head-on, you may realize you need to make changes, shift direction, or adjust your focus on new goals. A sound business plan will help shape and strengthen your venture, making it more likely to succeed.
4. It provides you with a documented revenue model, financial projections, and financing requirements
How will your business make money? How much money will it make? How long will it take before it makes enough money? How much money does it need in the interim? Where will this money come from? These are all critical questions to be asked and answered by you, your team, and your investors. Documenting your revenue model will enable you to determine, analyze, assess, and adjust the assumptions associated with the model. Understanding your revenue model and its underlying assumptions will help you determine how much capital you will need to fuel the engine of your business, how long this capital will sustain your operations, where this capital will come from, and what it will be used for.
5. It is an essential requirement to attract investors and funding
Your business plan will form the basis of your pitch to potential investors and will be a condition to secure required financing. Sophisticated investors, such as angels and venture capitalists, will want to see a detailed business plan that answers fundamental questions about your venture. Is there is a need for your product or service? Do you have the right management team? Is the time right for market entry or expansion? Are your financial projections sufficient and make any sense? What does success look like? What is the expected return on investment (ROI)? Is there a sensible exit strategy? Your business plan is an essential tool for raising capital.
Starting or operating a business is a serious undertaking. It requires focus, attention, drive, and determination. Preparing a detailed, comprehensive business plan is one of the best ways to demonstrate your commitment to growing your business to your team, to your investors, and to yourself. Over time, you may need to reposition your business to deal with changing circumstances and market conditions. If you find that your strategies, tactics, or operational models aren’t working, you may need to revisit, reconsider, or even rewrite your business plan to accommodate these changes. As you move from planning to doing, from dream to action, and as you watch your business grow, evolve, and thrive, you will see “the vital importance of being earnest”.
Contact us to see how Daring + Kind can help you prepare or revise your business plan.
