It’s not enough to have a business plan today. Even though many entrepreneurs don’t even bother to create a plan for their business, there are many who do create business plans that fall short of effectively communicating their vision or compelling investors to buy into their ideas. In this article we go through the 12 principles we wish we knew before we started creating business plans. Incorporating these principles will give your business plan the greatest chance of success and help you to avoid wasting time as you pursue your goals.
1. Increase Chances Of Success
You probably have heard the saying, “If you fail to plan, you plan to fail.” One of the most important things you should remember about business plans is how important planning is to your chances of success. According to research mentioned by the Harvard Board Review, entrepreneurs with formal business plans are 16% more likely to perform successfully (HBR.org, 2017). If you don’t want to improve your chances of performing successfully, don’t lose sight of the importance of having a formal and professional business plan.
2. Keeps Business On Track
From time to time changes in an industry could threaten to distract your business from its original mission. It’s important to have an underlying document that keeps your business on track so that you can continue to climb the business ladder towards success. Falling the latest public health scare, with millions of businesses going out of business, having a solid business plan to adhere to can be of great help for not losing your way during extreme times.
3. It Can Open Doors
Many funding institutions, including some of the banks who lend to businesses the most, require a formal business plan as a requirement to get funding. As businesses continue to struggle through the volatility of swiftly changing markets, financial institutions are becoming more and more reluctant to fund startups and ongoing businesses from concern about all of the businesses who fail within the first five years. To open (and keep open) the doors of funding, it is vital to create a business plan that demonstrates the potential of your business to overcome common challenges and achieve success.
4. It’s A Work In Progress
It’s normal to be nervous about creating a document as serious and extensive as a business plan. It can be even more nerve wrecking knowing that it will be reviewed by funders and others who will be making the decision on whether or not to fund your business. However, keep in mind that writing a business plan is not something you do in one sitting, it takes time to be completed and you shouldn’t rush the process. Likewise, you shouldn’t think that it is ever fully complete. You should review your business plan at least once per year to make any adjustments based on inevitable changes in your industry and changes in your business.
5. Know Your Purpose
Why are you making a business plan? Is it to convince investors to fund your business or are you simply creating a document that you will use to govern the organization of your company? Knowing the difference early on is important because it will determine the tone and presentation of your business plan. It also determines the audience you are writing for, which may determine what elements go into your plan.
6. Grammar Matters
It should go without saying but bad grammar can make a good business plan appear to be a bad one. It’s all about projecting the appearance of professionalism that keeps your investors and other stakeholders from becoming distracted.
7. Check (& Recheck) Your Numbers
This is especially important when you are proposing your business plan to investors. Investors and funders will be meticulous about the numerical data in your business plan to make sure they add up. Nothing will send your business plan into the trash by an investor or funder faster than a bunch of plan numbers that don’t add up.
8. Saves You Time
The long length of a business plan (20 – 50 pages) sometimes scares entrepreneurs from taking the time to create one. After all, it’s not likely that such an extensive document will be completed within one sitting, so in an effort to save time, many business owners will avoid making a business plan. The problem with this thinking is that not planning for success in your business through a comprehensive plan will cost you much more time in the long term as you fall into the pitfalls that having a business plan could have helped you avoid.
9. Don’t Add Fluff
The definition of “Fluff” is actions that are perceived to be trivial or superficial. In other words, don’t add words or charts to your business plan that don’t genuinely contribute to genuinely telling the story of your business and supporting your claims that it has potential. Some entrepreneurs fall for the false concept that a long business plan is better, but in the world of investors, venture capitalists, and banking institutions, less is always more, as long as the “less” is adequate.
10. It’s A Master Document
It’s not likely that you and your employees will use your business plan to refer to during their daily tasks. However, your business can serve as a master document that you can draw from to set your yearly, quarterly, monthly, and weekly goals. Your Key Performance Indicators (KPIs) should not come from a vacuum, but should be aligned with the overall vision of your business as documented in your business plan. Remembering this will keep your business in sync from top to bottom since your partners, employees, and other stakeholders will all be on the same page.
11. Values Are Important
Business values are what core beliefs that your business stands for as an organization. Often business owners neglect following a core set of values in their business, and even fewer of them document those values within their business plans. This is a mistake. The fastest way to find your business pursuing goals that are disconnected from the overall vision of the company is to ignore core values that detail who (not just what) your company is. For instance, if you have a core value of “High Quality”, your business will be far less likely to choose a supplier just because they produce products quickly even though the quality is low. Values keep your business on track like nothing else, and you should include them in your business plan.
12. Be Ready To Share
It’s common to prepare your business plan to be shared with your colleagues or investors, however, you should also have your business plan ready to share with others at a moment’s notice. When you’re out and about in your city or traveling you never know when you might meet someone who could fund your business or who could end up being a great business partner. You want to be able to get your business plan to them as quickly as possible in a format they can read easily. Being able to email your business plan at a moment’s notice in PDF or Word format keeps you from missing opportunities that may emerge on the fly.
Having a business plan in today’s business environment has never been more important. Obviously there is a difference between the few business plans that make it to the top of the pile of plans investors and banks receive each year and the many more that end up tossed to the side. Considering all of the items in this article will help your business plan rise to the top of the pile and keep your business organized and focused over the long term. For more information on easily crafting a business plan that includes these principles, try the easy business plan made by businessplanking.com.
Research: Writing A Business Plan Makes Your Business More Likely To Succeed, Francis J. Greene and Christian Hopp, 2017.