It’s not that unusual for some people to start a business (and even run a business) without any notion of what they’re doing. They just do something they like doing and earn money from it. And if you’re making money why do you need a business plan?
A business plan document was traditionally designed so the business owner could apply for and receive financial help through loans, venture capital, and other investments.
However, the other reason for the business plan is that it will help you determine before you invest too much time and effort if your business idea is viable or not. Plus, it can be the beginning of a roadmap with daily operation tasks and activities that lead to building and growing a successful life-affirming business.
Free Download: 2 Essential Business Plan Templates
10 Reasons Why Your Business Will Need a Business Plan
Many small business owners think they don’t need a business plan because they aren’t going to borrow money from a bank. However, the business plan helps you set up your business in an organized way to work step by step on building your business.
And you’re much more likely to experience success if you create a business plan.
1. To Show That Your Business is Possible
You may think you have a great idea to make widgets for the masses, but only through research can you ensure that your idea is possible. When you study all aspects of your market, you can avoid the mistake of starting a business with no chance.
Just because you think your idea is a good one doesn’t mean it is. You’re not your market even if you think you are. There may indeed be 10 people who need your widget but are there enough people to support you as you need to be supported?
2. To Understand Your Competition
One really cool fact about discovering your competition is that competition proves your idea is a good one. If there are no competitors, this isn’t necessarily a good thing. It’s hard being the first to market with a new idea. In fact, it can be costly to be first.
If you study businesses, you’ll note that it’s not always the first to market that makes it. It’s often the copycats that come later that truly make it work after a known market for the product. You can use your competition to avoid mistakes as well as find your audience.
3. To Know Your Customer Better
When you develop your business plan, it forces you to find out not only who your exact ideal customer is, but where they are, what they need, and how you can best communicate with them about their problems.
When you really know who your customer is, you can create marketing and advertising content that is more effective as well as create better solutions for them too. Study the customer through their buying journey to ensure you know exactly who they are and how they make decisions.
4. To Document Your Revenue Model
The thing about business is that it’s supposed to earn money. Therefore, part of creating your business plan is to ensure that the business idea you’re going with can possibly earn enough money for your intended lifestyle and purposes but also what type of accounting you’re going to need.
Most small businesses are relatively simple to set up, but you really need to understand how to keep track legally so that you don’t pay one more penny in taxes and fees than you need to. You’ll need to know how you’ll collect the money, what happens after you collect it, and follow all the rules and regulations based on the type of business entity you choose.
5. To Reduce Risk and Judge Potential Success
When you put everything down on paper, from how you’ll set up your bookkeeping to how you’ll process each customer’s order, it’s a lot simpler to figure out if success is possible. You’ll definitely reduce risk by setting up everything in advance of starting. When you can see how the process works, from attracting a customer to converting a customer to serving a customer, you can fix any problems before they start, ensuring your success.
6. To Develop an Operation Roadmap
When you create your full business plan, you’ll also create a ‘how-to-do-everything’ you need to run your business in a step-by-step process. For example, you’re going to need to figure out your process for purchasing stock, a purchase price point, a markup formula, finding customers, upsells and downsells, refunds, etc. Everything that needs to be done needs a step-by-step plan written out.
7. To Reorganize During a Crisis
Sometimes you’ll need a business plan to help you get through a crisis. If you write your business plan right, you’ll know your break-even point, the minimal resources you need to make it work, and so forth. This information will make it simpler for you to figure out what to do if business slows due to outside reasons such as health or economic turmoil. Everything is taken into consideration while developing the business plan.
8. To Develop and Document Your Marketing Plan
The business plan covers everything you need to do to actually do your business with your customers, including how you’ll get the word out. The marketing plan is an essential part of your business plan that will help ensure your success.
9. To Forecast Business Needs
As you develop your business plan, you should end up with a list of resources, staff, money, equipment, software, and so forth that you need to be successful. You’ll know exactly what you want and need and how much it’s going to cost you. Even if you note things that you can’t afford right now, you can set up a plan to get around it until you can afford it.
10. To Highlight New Opportunities
As you’re creating your business plan and going through each of the steps and areas of the business plan, the brainstorming gives ideas for more products and services aligned with what you’re planning to offer. These new opportunities can help you grow your business bigger and better than you may have thought to start with.
Free Download: Your Essential Business Plan Template
Whether you’re starting a business or drafting a formalized document it can be tempting to think of a business plan as simply your company’s name and a description of your product or service. But in reality, planning a business involves thinking through a lot more details.
Check out this free business plan template from the HubSpot Academy that will help and guide you through the steps of writing company and product descriptions, setting sales and marketing goals and plans, and thinking through legal and financial logistics.