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Why Write a Business Plan?

March 25, 2010 by Frank Goley, Business Consultant

A Business Plan is the most important and often overlooked part of running or starting a business, expanding an existing business or obtaining finance for a business.  If a Business Plan is developed effectively, the success rate for the purpose of the plan rises exponentially, whether it is to start, expand or run a business, and / or obtain finance for the business. 

A well developed Business Plan leaves less room for errors and failure.  While you cannot predict everything that happens in a company’s future, a good Business Plan helps you to avoid certain pitfalls, overcome obstacles and anticipate and create business opportunities.  When you do encounter obstacles and problems, having a Business Plan in place, integrated into the business, provides you with a system and mechanism to effectively deal with challenges, often turning these challenges into manageable situations or even future opportunities.

Let’s start with the fundamental questions:  Why have a Business Plan?  What can a Business Plan do for my company? 

First, a Business Plan helps you run a Business and is the roadmap to business success.  This is the primary reason for a Business Plan, and the plan should be initially written from this standpoint.  However, there are many other beneficial reasons for developing and implementing a business plan.  A Business Plan forces the various departments in your company to work together to implement a synergistic Strategic Plan.  A well developed plan helps your Sales Team close more deals and provides them effective tools to use in the field with your customers.  A Business Plan helps your customers understand the direction your Company is taking, encouraging them to become “partners” in your business’ success.  Your Business Plan can help you solidify relationships with necessary suppliers, helping them to more effectively understand how to contribute to your Company’s growth.  A Business Plan can also effectively assist in obtaining the necessary finance to start or grow your Company.

Business Plan Uses

There are different Business Plan formats and purposes for various circumstances and situations.  It is recommended to first develop a Comprehensive Business Plan to effectively and successfully run your Business, Venture or Projects.  Once the Comprehensive Business Plan is completed, you can take certain parts of the Plan to form other Business Plans for various purposes and situations, such as a Funding Business Plan for a Bank or Venture Capital Firm.  A good Business Plan Workbook will take you step by step in developing a Comprehensive Business Plan, which you will be able to “adjust” for various purposes and uses beyond the effective management of your company.

Internal Uses of a Business Plan

1)     Identifying the strengths and weaknesses of a company’s operation and potential problem areas.     

2)     Improved company performance results from developing and implementing Strategies which simultaneously builds on a Company’s strengths and correcting its weaknesses. 

3)     Communicate effectively to Management and Employees clear expectations of a Company’s performance and priorities to ensure a coordinated execution of a Company’s Strategic Plan. 

4)     An Effective, Comprehensive Business Plan coordinates and assures consistency between a Company’s various divisions and departments to bring about the successful operation of the Company’s various units. 

5)     A Business Plan provides a mechanism to measure a firm’s and individual’s performance.  It establishes a clear standard for determining whether actual performance is good, bad or neutral. 

6)     A Business Plan establishes a system for making key decisions in the Management process of a Company.  As new developments, opportunities and difficulties arise, the Business Plan provides a solid structure to evaluate the impact of developments and opportunities on the operations and performance of the Company as a whole and in its individual departments and units.   

7)     A Business Plan’s development process will educate and motivate a Company’s employees. Management, Executives and Key People learn more about a Company’s Operation and the direct relationship of their areas of responsibility toward the achievement of a Company’s goals. This is achieved through analyzing variables like past performance or the impact of trends and developments, while developing Action Plans for the future success of the Company.  The process solidifies your people’s commitment and motivation toward achieving the Company’s Strategic Plan.

External Uses of a Business Plan

1)     A Business Plan can update and educate outside parties (i.e. investors, shareholders, suppliers, customers, regulators, legislators, etc.) regarding the structure, organization, objectives, goals and performance of your Company. 

2)     A Business Plan can secure finance and investment to fund your Company. 

3)     A well executed Business Plan can preempt your competition, making barriers to entry apparent. 

4)     Solidify your customer relationships making them true partners in your Company’s products and service offerings, innovation, research and development, and most importantly, your growth.  

5)     A Business Plan provides your important suppliers insight into your Company so they can help you manage costs and promote growth.  A slight change in a supplier’s offering or terms can have a dramatic effect on your Company’s profitability. 

6)     A Business Plan is a sales tool, assisting your Sales Team to promote understanding throughout your customer base of your Company’s direction, competitiveness and uniqueness.  An integrated Business Plan enables your Marketing Team and Sales Team to open new markets and opportunities and close more deals. 

7)     The Plan demonstrates to third parties your Company’s core accountability, beliefs and integrity.

Posted in Business Planning.