A business plan is a good way to get your thoughts together in one place. There are other benefits as well, not just being a check list for yourself.
Your business plan doesn’t have to be formal if you don’t plan on getting investors or loans from a bank. However, it is good to have some kind of business plan to guide you through your journey. I have collected several reasons why you should make one, even if you don’t want to make it very formal. Let’s dive right into it.
1. To get image of your business clearly yourself
First on the list is to make yourself clear, what you are about to start. Even if you had a great idea, there might be things you are missing because the thoughts are flooding inside your head. Get them on the paper to see the whole picture more clearly.
When making a business plan, you usually get a good picture of how much it will cost you. The costs will differ depending on the industry you are planning your business in, but make sure not to calculate the costs too small. Have some room for surprises on your financial calculations, because too often, there are some on the way.
When making your business plan, think about who you will sell, what you will sell, how much you will make profit along the way, and what are the main risks of the business? It is also good to take a look at the competition in certain fields of business. We will talk more about this below.
2. Show your plans to potential investors
Even if you might not consider taking on any outside money, often times if you want to get a loan from a bank for your business, a business plan is required to get anything. It is a good way to show you are serious about it and that you have considered different scenarios that might happen.
If you plan on taking outside money, and bringing investors in, they usually want some kind of plan as well. Not just yourself saying, you plan on making money selling shoes to kittens and that they should give you a million dollars which you will double in the next month. Having realistic and good plans is a good sign to investors that the investment might have a good return.
3. Make realistic schedule based on the plan
Having a business plan can also be a good fountain of realistic schedule for your business. Starting a business does not usually happen overnight, and growth in some industries can be very slow. Having a schedule will help you to think what comes next.
Business schedules are seldom accurate, but they can give some kind of guidelines on what could be accomplished in a certain period of time, or at least, on what order the tasks are to be completed.
4. Get clear picture about the competition and barrier of entry
On competition side, there are two things to consider.
First, let’s talk about the current competition. You might have a lot of competitors if there are also a lot of customers. There might also be only one or no competitors, but also the customer base is very narrow. Every situation is unique. The business might be local or global, where the competition varies as well.
Take a loot at your competitors before starting anything. Think about what you can do better. Buy your competitors products to see what they do, if you see any improvements, write them down. Take notes about the good things they do as well, and try to implement those into your business.
You should not copy the entire business model of your competitors, have some edge over them. Do something better and attract the customers that way.
Barrier of entry
Second is the barrier of entry. Even if the industry doesn’t have a lot of competition at the moment, if the barrier of entry is very low, that might change in the blink of an eye.
On the other hand, if the barrier of entry is higher, that might be a good thing for you. Even if the costs of starting the business are a bit higher, in the long term, that might offer you protection over new competitors. Clouds can have a silver lining every now and then.
5. Later on, you can compare how you performed
Last on my list is that later, you can compare how you performed based on your calculations and expectations before starting. This can give you a good picture of what you did well and where you went wrong.
Seeing better the fields you can improve on can make a good base for future development. Write down things you could have done, apply the changes, and after a while, see how you did. Don’t get blinded by your own work, be realistic and set realistic goals.
Like I said at the beginning, the business plan doesn’t have to be formal, but some kind of action check list might be good to have. Even if the business model is the simplest one in the universe, still, having guidelines and calculations are good to have.
Having some kind of estimates of your first year’s sales can be a good benchmark when you finish your first year. It can be really fun to see, how you performed and to do next years estimates based on those numbers.
Other business-related topics can be found here.
Hopefully this was helpful to you, have a nice day.