1.01 – The Importance of Business Planning
Starting this course indicates that writing a business plan has made it onto your to-do list. That’s a significant step forward. Now come the questions. What exactly is a business plan? What should it include? How should it be organized? And do you really need one?
This lesson addresses all those questions and more. It offers plenty of reasons why business planning is essential – both when you start your business and at every growth stage along the way. It helps you think about the audience for your plan, what its key components should be, and how to put it together. It also updates you on changes and challenges facing business planners in today’s rapidly transforming business arena.
The Importance of Business Planning
Nearly all business experts agree on one thing: the importance of drafting a business plan. Yet many business leaders plunge into the competitive arena without a formal plan. Why? There are plenty of excuses posing as reasons. Some entrepreneurs are so carried away by their enthusiasm that they figure their passion and optimism are enough to build a successful company. Others say they were just too busy to develop a formal business plan. But operating without a plan can prove even more time-consuming in the long run. These sections clarify in plain English the importance of having a business plan.
Time spent putting together a solid business plan is time well spent. Don’t be overwhelmed by the task you’re launching. The basic components of a business plan are fairly simple and the benefits are many.
Tallying up the benefits of a business plan
Some of the benefits you can gain from business planning include:
- Testing Your Business Idea: An opportunity to test your business idea to see whether it holds real promise of success.
- Clarity of Mission and Vision: Clarity about your business mission, vision, and the values that can help steer your business through times of growth or difficulty.
- Business Model Description: A description of your business model, or how you plan to make money and stay in business, along with a roadmap and timetable for achieving your goals and objectives.
- Understanding Customers: A portrait of your potential customers and their buying behaviors.
- Competitor Analysis: A rundown of your major competitors and your strategies for facing them.
- Industry Analysis: A clear-eyed analysis of your industry, including opportunities and threats, along with an honest assessment of your company’s strengths and weaknesses.
- Performance Benchmarks: Benchmarks you can use to track your performance and make midcourse corrections.
- Marketing Strategies: An explanation of your marketing strategies.
- Financial Analysis: An analysis of your revenues, costs, and projected profits, along with cash flow projections that help you anticipate your funding needs until revenues cover expenses.
- Risk Assessment: An assessment of risks and the forces of change that can threaten your success or present opportunities to capitalize upon.
- Business Introduction: A résumé you can use to introduce your business to employees, suppliers, vendors, lenders, and others.
Knowing what can go wrong without a plan
The many benefits of having a business plan should be enough to convince you. But in case you’re still wavering, consider what can go wrong if you don’t take time to plan. You risk:
- Running out of cash because you haven’t projected start-up or expansion costs and the amount of funding you’ll need before sufficient revenue rolls in.
- Missing sales projections because you don’t really know who your customers are, what they want, or how they shop and buy.
- Becoming overwhelmed or sidetracked by too many options because you never took the time to focus on a mission and vision for your company.
- Going bankrupt because you don’t have a rational business model or a plan for how to make money.
In conclusion, a business plan is not just a document; it’s a tool for understanding how your business will operate and achieve its goals. It’s worth the effort to create a comprehensive and realistic plan to guide your business to success.
