One of the most common questions we are asked by clients looking to start up a new business venture is: why do I need a Business Plan? It’s a very valid question.
First of all, think of all the things you do on a daily basis. If you look at your current job, either paid or unpaid, you likely have multiple duties to take care of. Some occur daily, others weekly, some monthly and then there are the dreaded surprises that pop up unannounced.
Can you remember a time when all of these items, and then some, piled up on you all at once and you didn’t really don’t know where to turn first?
With experience, most of us deal with this by prioritizing what to take care of first and working our way through this list of chores until we finish, take a big breath and sigh in relief.
Well, imagine if you were running your New Business venture and the above laundry list piled up on you. What would you do first? You need to take care of sales, make sure that you have time to do what you do (skills tasks), marketing, follow up with vendors/suppliers, schedule your month end bookkeeping, clean your equipment, re-order new tools, develop your new marketing materials, update your website, get the graphic artist and printer on board, interview new applicants for the busy season, pick up bread on the way home, get the delivery vehicle serviced, you get the picture.
This is the first reason you need a plan. A thorough and detailed business plan with specific tasks and goals helps you juggle the numerous items you need to take care of on a daily basis. Without it, you won’t be able to maximize your time to the best of your abilities.
As a new entrepreneur, you need a road map, a document that shows you where you are today, where you are going and how you are going to get there. If you come to a fork in the road, it will show you where to turn to maintain your focus.
One of the major challenges facing any new entrepreneur is the change from being good at what you do and then having to also look after all the other items you didn’t have to do when you were working for some other company or organization. You may be very good at the job itself (service/skills), but the other balls that you are juggling will take up just as much time and resources as the task you do to earn business revenue. The Business Plan will help you keep all the balls in the air.
The second reason for developing a business plan is to determine your start up and working capital requirements. Without a comprehensive financial analysis, you have no idea of what these requirements are. If you are seeking debt financing, the business plan has an additional role. It then becomes a sales tool. Without it you cannot borrow capital from traditional sources. With a comprehensive business plan, you can sell your idea, showing you have the capacity to repay the monies borrowed based on your thorough market analysis, including your sales process.
The question then becomes how do I start developing a business plan? First, get your ideas down. Once you have your thoughts written, this will bring some other questions to the surface. The more you can jot down, the better. Make sure you really understand the industry and market that you are entering.
Identify your start up and working capital requirements. Once you have this information, you can decide if you are self financing or looking for capital. If you are seeking financing, your Business Plan will serve both as your road map and as a sales tool to secure financing.
Why do you need a business plan? As the old saying goes, planning without action is futile, but action without planning is fatal. Without a plan, you are moving in an unknown direction and you have no idea of how much it will cost.
Need help in getting started? Take a look at our online resources, e.g., Halton Region Small Business Centre’s Guide to Starting a Business, Halton Region Small Business Centre’s Business Planning Template and Canadian Banks Business Plans – Templates and Samples. Or consider signing up for one of our upcoming Steps to Success seminars. For more tips, follow us on Twitter @HaltonEcDev.