Entrepreneurs tend to be visionaries, not planners. We have a great idea, we can see the 5-year and 10-year future, so we go for it. We're like the woman who attended a birthday party and fell in love with the adorable cupcakes the hostesses had ordered from out-of-town and had to drive an hour to pick up. Wouldn't it be great if the cupcakes could be bought locally?
This is wonderful, if you're not relying on your dream to pay the bills. For most entrepreneurs, this is one of our ultimate goals: To build a business that pays our bills, and then some, and that provides us with a sense of satisfaction, fulfillment, and freedom.
Getting from your vision and mission to fulfillment though requires more than happy thoughts and elbow grease. You need a plan.
While I can give you dozens of reasons to write a business plan, I'm going to divide these up into four basic areas:
A business plan allows you to see the strengths of your business
As I mentioned, entrepreneurs tend to be visionaries. We see the big picture. Sometimes, this means that we can't see the trees for all the forest. Writing a business plan will help you see the specific strengths of your business, whether they're in your personal abilities, in specific details of your target market or in the way you position your brand.
The process of researching and then writing your business plan will help you identify these details and analyze the best way to use the information to the benefit of your company. For our inprepid cupcake owner, perhaps her strengths are in her ability to get things done, her boundless energy and her swasivious personality.
Once you have figured out your business' strengths, it's time to flip the coin.
A business plan gives you an overview of the weaknesses of your business
This is an area most entrepreneurs don't even want to think about. As die-hard optimists, we would rather wile away the hours planning to take over the corner on the cup cake market, not talk about the fact that we have never baked cup cakes before in our lives.
But look at it this way. If you know what your weaknesses are ahead of time, you can develop tools to minimize them or even capitalize on them. So what if our winsome cupcake entrepreneur has never baked a cupcake in her life? Her Aunt Matilda is the no-holds-barred queen of cupcake baking in her county. Bring her on board and she has an unbeatable recipe for cupcake sales.
A business plan enables you to identify opportunities available to your business
Before I started my first business two decades ago, I had the entrepreneurial itch. I just didn't know what to do. So I sat down and did an analysis of my situation. I discovered my strengths, identified my weaknesses and then started looking for opportunities.
My strengths: A degree in Journalism and Public Relations with a minor in art. I can write and design and I have a piece of paper proving it. (Not that the piece of paper really matters…)
My weaknesses: No personal background in small business, though my dad's family ran a mom and pop hardware store and then purchased and ran a grocery store for many decades.
My opportunities: This is where I floundered for a few months. Where could someone in my position get my foot in the door? At the time, I was a member of an online parenting community and had a one-year-old son. What could I possibly do?
Then it hit me. The administrators of the parenting website needed graphics. So I started providing those graphics. I also started teaching myself HTML and building an ecommerce website. Soon, my fellow parents started to see that I could build websites and began asking if I could build them sites so they could sell their baby products online.
That's when the lightbulb went on for me. I realized that I could build a business providing web design, hosting and ecommerce services for these women. Later, I realilzed that new small business owners needed a lot of training in the initial phases of started. So I began to offer coaching. Without planning, I would have never identified my strengths, weaknesses or opportunties.
Our adventuresome cupcake seller can have the same epiphany as she constructs her business plan. Perhaps there is a hole in the cupcake market that she can fill. Not only is there no one to sell cupcakes locally, but maybe the schools are having trouble getting good fundraisers. Just think. Selling cupcakes and raising funds for the schools all at the same time….
Of course, knowing all these things does no good if you don't also take a look underneath the rock in that rosy picture.
A business plan provides you with a method for evaluating threats to your business
Any business you start is going to have threats. They may come from within, in the form of unidentified weaknesses, or from outside, in the form of competitors. And it's not just people you have to worry about. Changes in the market, in your industry, and in government regulation can threaten your business.
Our cupcake store owner needs to take a hard look at that nearby cake bakery to see what it is they're offering and how she can improve upon what they do. She also needs to consider her industry as a whole. Are there changes that could make her methods or products obsolete? Perhaps new government regulation could make required upgrades in her kitchen an unsurmountable expense, unless she looks for ways to solve that problem, like sharing kitchen space with another business in a professional quality, up-to-code kitchen.
Changes in the market can also threaten a business. A new cupcake bakery can thrive in isolation. But what happens when three other bakeries open up down the street? Identifying these threats early can enable a business owner to proactively set themselves apart before the threat becomes fatal.
Writing a business plan can help new and existing business owners thrive in ever-changing industries and markets.
Remember the adage: Those to fail to plan, plan to fail. Need help writing your business plan? My mentor Cindy Bidar has an online business startup plan course you can take right now. Just click that link.
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