What is a business plan, and why do you need one?
A business plan is a written statement that describes the nature of a business, target market, advantages the business will have in relation to competition, and the resources & qualifications of the owner(s). (Nickels, McHugh, McHugh, & Cossa, 2007) While the business plan details past and present ventures, its primary focus should be the future plans of the business.
A business plan should ideally be developed as the business transitions from an idea to reality. Alas, many companies are already operating without a documented business plan. That’s ok! The business creator has likely undergone some form of mental business planning, or even performed some analysis to help with their business decisions. This leads us to the second question you might be asking yourself, “If businesses can be successful without a business plan, why go through the hassle of creating one?”
Well, those ‘successful’ businesses would probably be even more successful had they developed a business plan. There are several reasons why all businesses should develop a business plan, whether they are in start-up or have been operating for 50 years.
Four reasons why every business should have a business plan
- Business plans are necessary for talking with bankers and other investors.
- Business plans help you to take advantage of opportunities and mitigate risks.
- Business plans help you focus, in a logical and organized manner, on the strategy for future growth of your company.
- Developing a business plan ensures that both market research and financial analysis be performed.
By reviewing the above list, it is clear that some preliminary work be performed prior to completing a business plan. This is critical. While the final document does have some value, it is the thinking process that is undergone while creating a business plan that is most valuable. While business plans are not a be all and end all solution to a business’s problems, they will certainly help a great deal. As Harvey Mackay once said, “If you fail to plan, then you plan to fail”. I couldn’t agree more.
You should now be convinced that developing a business plan is probably a good idea. However, you may still be hesitant because you are unsure how to go about starting. Let me briefly explain how to get started, what the process involves, and where to find additional resources.
To start, there is no such thing as the perfect business plan. People may be intimidated to start a business plan for fear that it may take too long or they may not ‘do it right’. Remember that a great final document is not the final goal here. A business plan can be considered a formal process that ensures that each main factor affecting your business is considered with sufficient depth so as to gain more knowledge of the company.
So, what does the business plan need to cover?
Every business plan should include the following sections (if applicable)
- Executive Summary
- Business strategy
- Marketing Strategy
- Operational plan
- Strengths, weaknesses, opportunities and threats analysis
- Human resources plan
- Social responsibility strategy
- E-business strategy
- Financial forecasts and other information
- Additional Resources
For detailed explanations of the above sections and other information about creating a business plan, visit How to Prepare Your Business Plan.
Nickels, McHugh, McHugh, & Cossa. (2007). Understanding Canadian Business: Change In A Dynamic Work Environment. McGraw-Hill Ryerson.