I spent a week copying and pasting a business plan for my pillow business. I got excited answering questions about who my customers were and how I would sell to them.
In the end, I never got to open a page of the business plan and what started as a bag business ended up a pillow business. I felt the business plans I found were too complicated in a language I didn’t understand.
When I started the business, I spent time rewriting a lean business plan; something I’d open, find joy in opening and using rather than flipping pages wondering what a or b meant.
Writing a business plan is the scariest thing business owners face when beginning their businesses. Some entrepreneurs end up wasting a whole year then years planning a business on paper and not taking action toward developing it.
Writing a business plan can either be good by helping you answer a few questions or the worst nightmare because you want a perfect outcome.
Unless you’re looking for funding, don’t spend your energy wasting time on paper, use your energy towards growing your business.
You can always tweak your business plan as your business grows or expands.
Planning gives you a footprint of the pathway to follow.
Most, if not all, successful businesses have achieved greatness by employing a functional plan in their business activities.
However, there are some entrepreneurs who feel that the concept of having a business plan is not as important. They hold on to the idea that business plans are overrated and you need to take action.
A business plan ties you down to this routine setup that is not accommodative to change. While this is not entirely true, a lot of entrepreneurs are now downplaying the value of writing a business plan. We are going to look at what a business plan is and why we need a business plan to operate a business.
A business plan isn’t a static unchangeable document but a plan of actions that need implementation asap and the plans can change as the business evolves.
What is a Business Plan?
Simply put, a business plan is a set of intended courses of action for a business.
A business plan is a written document that highlights the objectives of a business and steps to be followed in order to achieve these objectives.
A business plan is like a road map. It shows us where a business is, where it wants to move to, how it can move and when it should move. This is the scope for the operational strategy of a business.
A business plan outlines the future activity of an existing or proposed business venture.
What’s in a Business Plan?
What is in a business plan?
A good business consists of the following:
- Name of the business
- Product or service to be sold or produced
- Personnel to manage the business
- Amount of finance and other resources required
- Types of employees required
- Market to be served
- Projection (level of success in future in terms of profit)
- Summary of the plan
These are the key contents of a business plan. In detail, it gives the business model description, market information on competitors and customers, financial ability and personal information of the business. This is the game plan for the business.
Why is a Business Plan Important?
Having a plan is always key to ensure good business performance. There are a number of reasons why having a business plan is important.
- To obtain funding
Many financial institutions like banks require a business plan before giving out financial aid in terms of loans. A clearly defined business plan builds faith and confidence in the money lenders to give out funds for the business to operate.
- Allocation of resources
It is important to determine the resources required for any business. Resources may be capital or human labour. How are the resources acquired? How do you plan to use the resources? Where do you plan to use them? Having a business plan will ensure that the utilisation of resources is carefully thought out to avoid using them for the wrong purpose.
- Facilitates business evaluation.
Having a plan helps an entrepreneur to assess the progress of the business.
An entrepreneur can work within his or her laid out plan and vision. He or she can identify any pitfalls and map out all the aspects of the journey ahead of them.
Any deviation from the intended plan can therefore be corrected in good time.
- To attract investors.
Investors want to be sure of where they put their money. For that case, they are going to want to thoroughly go through your business plan and see if it meets their objectives and goals.
The business plan should answer investors’ questions. This provides a basis for making any business proposals and recommendations. Why do we need this product or service?
What is the company’s exit strategy in case of failure? What are the financial prospects of the business? Ensure that the business plan is tailored to get you, potential investors.
- To outline competition.
Once an entrepreneur has chosen his area of interest in business, he should remain fully cognizant of the market he or she intends to operate in. What are the ongoing trends?
Who are your competitors? What are their strengths and weaknesses?
How can you gain a competitive advantage over them? These questions are important in order to stay afloat in a competitive business environment. An entrepreneur can also develop better products and services in this way.
- To enhance credibility of your business.
Having a business plan goes to show how much you value your business and how much you are serious about it. Planning a business takes a lot of time and effort.
A good business plan shows how much you are willing to sacrifice to ensure your business succeeds.
- To avoid mistakes
In the process of drawing a business plan, mistakes are identified and corrected. Strategic solutions are also put in place to prevent or correct any potential business risks.
- To identify strengths and weaknesses
Writing a business plan helps you better understand your strengths and weaknesses. This helps you to improve on your shortcomings and build your strong suits for a greater advantage.
- For adaptability
A well-drawn business plan should allow for change that might occur in the future. This may arise when the market industry has changed, the business sales have reduced drastically or you have changed as an entrepreneur. The plan should be flexible to accommodate this as sometimes events might not occur as predicted or as expected.
- A motivating factor.
When a business plan is communicating to employees and management, it informs them of the direction that is to be taken in order to achieve business objectives. This eliminates chaos due to disorder and hence everyone pools in their effort to work towards achieving a common good.
- Tool for control
Planning involves setting standards against which business performance can be assessed. When the business fails to meet its expected performance, corrective measures are put in place for deviation back to normal.
- Determine financial need
Planning is essential when making capital decisions on a business. How much capital is required? How can you raise capital? This will help in planning how to use capital for business success.
- To attract partners
Potential partners need to review your business plan before they choose to enter into a partnership with you. The business plan prospects should cultivate interest in these potential partners.
- Keep focus
Having a business plan stops you from pursuing wrong goals that are not in line with the ones laid out. This keeps you away from following wrong opportunities.
Why Do Some Entrepreneurs Not Write Business Plans?
- It limits your thinking and learning
Having a business plan ties you down to working in the scope of the set business goals and objectives. Any deviation from this is termed as not being focused. A person can explore many options without having a business plan.
- The business plan becomes outdated.
Market change is inevitable. A business plan that worked at the start of the business might fail to work as the business progresses. This lack of room for adaptability in some business plans makes business owners shy away from employing business plans into their systems.
- Time wastage.
Writing a business plan takes up a lot of valuable time and effort.
Entrepreneurs should not only be thinkers but doers. Most tend to just want to jump right in and work as they discover their strengths and weaknesses, instead of going through the long tedious process of writing a plan, revising them and using them as a point of reference.
- It might not help in making business decisions.
A business can change its course suddenly depending on both external and internal factors that contribute to its existence.
When an unpredicted change takes place, it needs an entrepreneur to think on their feet and oftentimes this might be difficult if he or she was dependent on a business plan to give them a course of action.
Related Resources on Why a Business Plan is a Waste of Time for Your Kenyan Startup
What’s a Business Plan?
Why Do You Need a Business Plan for Your Kenyan Startup
What are the 12 Components of a Business Plan?
Planning is essential for business success. The pros outweigh the cons.
The roadmap for business success should be clearly defined.
A business system operating with no business plan is a sure-fire way for failure. If you fail to plan, you are planning to fail.
A business plan isn’t a document that remains unchanged, you can update your business plan as your business grows.