Why Your Business Plan Outline Predicts Your Success or Failure
Some experts say a business plan is an integral part of starting your business and navigating it towards success. Others look at successful companies without written plans and figure it must be a waste of time.
The truth is somewhat more gray: it depends on what kind of planning you do and how much time you put into it.
What the research suggests
One study found two surprising results:
#1. Planning improved business results
#2. The results were better for existing companies than startups
This suggests that planning works better for businesses with a firmer grasp on their operations and their customers than startups, who naturally make a lot of assumptions at the beginning.
Another study found that of fast-growing companies with over 92% growth in sales in a year, 71% of them have business plans. Business plans create value, especially when you’re in fast growth mode.
Most importantly, this latter study found that those companies who did a good job defining their unique value proposition (what differentiates them from everyone else) in their plan perform better. This suggests that the quality of the business plan has an impact.
Finally, research suggests that having a plan is more about defining what you do best and setting goals on a regular basis. Then you tweak them as you learn more about your customers.
What this means for your business
If you’re an existing business, you should spend the time and make a comprehensive business plan that details your operations; your strategic goals; your marketing strategy; what you know about your customers, market, and industry; and your financial situation. And then you continually work on your plan as you learn more about your business, your products or services, and your customers. It should be a living, breathing document that you refer to often and revise as your business changes and grows.
If you’re a startup, create a lean business plan. You don’t need to put in the same upfront effort to create a comprehensive plan; a one-page summary can get you started. Begin with defining your goals and your customers’ needs. Then build on your plan as you learn more.
Advantages of having a business plan
Having a business plan won’t guarantee success, but studies have shown that those who do the work and create a plan reduce the likelihood of failing. Going through the process of researching, analyzing, and creating one forces business owners and entrepreneurs to think objectively and realistically about their business.
A business plan also makes it easier to communicate your company’s objectives and strategies to those who can help you most: investors, bankers, partners, employees, etc. In fact, creating a business plan helps you drill down to your essential core. If you don’t have an elevator pitch, you’ll have one after creating your business plan.
Finally, a business plan helps you identify areas where you may need external assistance. This could be in the form of mentors or advisers. Or you might want to seek the assistance of a business consultant who can help you address challenges and find ways to overcome.
If you need to borrow money or attract investors, you need a business plan. If you’re not looking for outside funding, however, you still need one, just not as detailed. Your business plan helps you track your goals and success and should be adjusted along the way as you learn more about your business and customers. By doing so, you’ll also be able to see what has worked in the past and what strategies you need to focus on in the future.
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