If you are considering in becoming an entrepreneur and start a business, let me point you in the direction of the business plan. Some will argue that you don’t absolutely need one, which is technically correct…
What happens when you don’t? With good luck and a booming economy, nothing. You can wing it and maybe everything turns out ok.
But, if any of the conversations I’ve had with people who were seeking advice are any indication, when competition is fierce and the economy is faltering, the lack of a plan is risky business.
True. A business plan is no guarantee of success. However, it certainly gives you a roadmap to reach your goals and indicators to measure performance. It is your thought-out vision for your company. If things don’t turn out as expected, you’d have an idea of where to focus on. Therefore, it increases your chances.
For starters, if you don’t have answers to key questions (such as the ones below), it would be a worth your while to spend some time thinking through a plan.
- Who is my core consumer?
- Why would he want my product/service?
- How much is he willing to pay for it?
- What is the competition doing?
- How will I finance the operation?
Now, if you are looking for external financing, you have no choice other than make the effort in drafting a plan. Banks and investors will want to know that you’re serious about your business, that you understand your business model, and that you’re clear on your PNL, cash flows and go-to-market strategies.
Some people start a business by sheer impulse of emotions. Which is great. Passion is a must. If you decide to jump into such an endeavor, it is definitely good to have a motor that will keep you going even when the going gets tough. Passion alone is not enough though.
It is hard. It takes time. Probably not much fun. Still, you should have a plan.
- You can’t only count on luck.
- You’ll have a blueprint with strategies for success.
- You’ll have business objectives which help you gauge whether you are hitting your targets.
- You’ll be a bit more prepared for changes and adapt accordingly.
- You’ll know how to manage, market, finance, and operate the business.
A plan is not set in stone. Nor should having one mean that there is no flexibility. Nor that you should stop identifying new opportunities.
Yet, it is a great tool that lets you play with different scenarios and evaluate feasibility beforehand. Maybe you find that you should be putting your efforts elsewhere. It helps you foresee, as much as possible, the potential problems and obstacles so you can come up with pre-emptive solutions.
Committing your ideas on paper increases your chances in actually getting into the business.
And, if you are already in business and there are changes in the market, or you are working on a new product line, or looking into selling in a new channel, it’s a good time to review your original plan. If not the full business, at the very least the go-to-market.