T plan or not to plan? Many entrepreneurs get an idea for a business and then dive right in without any formal planning.
Many feel that time is better spent on building their business, or they just don’t know why planning is important. But research shows that a business plan not only makes it more likely your business will get off to a good start, but also helps you get the start up and growth funding you need, makes it more likely that your business will succeed, and helps your business grow up to 30% faster than without a plan. 1
Having a business plan is an essential ingredient for a well-managed business. Most business owners and entrepreneurs have at least a “back of the envelope” idea that is the cornerstone of their business. A good business plan will fl esh out the key aspects of that idea and formalize it into a mission statement or a vision that serves as a guide for keeping your business on track with your goals and objectives. It should also cover what your product or service is, including how what you do is diff erent from what your competitors do. Evaluating and documenting your business’s strengths, weaknesses, opportunities, and threats (SWOT Analysis) provides a reality check and helps you understand how best to poise your business to leverage strengths and opportunities, while preparing to overcome weaknesses and threats.
Together, those pieces of your business plan set the stage for how you will run your business—they will help you fi gure out the best operating, fi nancial, and marketing strategies, and make realistic revenue and cash fl ow projections over a reasonable planning horizon. All of these inputs are key to making good decisions about how you will run your business, what kind of people you need, whether you can do it on your own or need investors, what your operating goals are, and how you will measure success. In short, your business plan will help you better manage your business because you will fully appreciate what you have to off er and what you are up against in getting your business off the ground or taking it to the next level.
At the same time, your business plan is a living document. The adage, “The only constant in life is change,” is especially true in the business world. Regardless of what it was like when you started serving customers, things have changed. Either the economy has shifted, your business has expanded, new competitors have arrived on the scene, or your mix of marketing tools is longer optimal. What’s more, you have changed. You’ve gained knowledge and experience that only comes with running a business.
In order to keep your business healthy, it is critical to understand and address these changes as a natural part of managing your business. That’s why business owners, operators, and managers should be constantly in planning mode—taking stock of their businesses, the environments in which they operate, and the trends influencing what their customers want.
Here are some tips to help keep your business healthy and on track for long-term profitable growth:
REVISIT YOUR BUSINESS PLAN. Though a yearly review is standard, more frequent business plan assessments for
new businesses and businesses in transition keep your business flexible in a dynamic environment. Update your plan with new or modified contingencies and economic realties, adjust your timeframes for key milestones, such as expansions or new product/service lines, and check in periodically to see how you are doing against the goals you set.
WATCH THOSE NUMBERS. If you are not regularly evaluating your financials, by the time you figure out something is wrong, it may be too late to fix it. Financials can tell you much more than whether or not you’re making money. They can tell you if you need more diversity in your customers, which products contribute the most profit margin, and whether you can afford to expand.
WATCH YOUR INDUSTRY. In today’s interconnected global economy, change anywhere can have a ripple effect on any business. Stay current with world and community events, study your sales records, and communicate with customers, suppliers, and colleagues. Participate in local business groups and professional and trade organizations—these are great ways to network and stay in touch.
WATCH YOURSELF. Make sure you’re mentally prepared and focused to handle the challenges and opportunities that come with growing a business. A successful business is not only about having a great idea; it is also about consistency of execution over a long period of time. While it’s natural to be exuberant about a new endeavor, you also need the stamina and resources to carry on over the long haul.
Planning will keep your business nimble and healthy, helping you to tackle and adapt to the changes that are inevitable as your business grows and thrives. Keeping your business plan up to date will position you to manage the risks ahead and meet your goals.
1 Parsons, N. (n.d.). Business planning makes you more successful, and we’ve got the science to prove it. Retrieved March 6, 2016, from BPlans: