Writing a Business Plan: Why It's Worth the Time and Effort

Are you thinking of approaching a bank for financing to support your business? If you haven't visited a manager before, then you may not know that the first thing he will want to see is your business plan. You may not be convinced that all the time and effort required to prepare a plan is necessary; if so, here are the main benefits for you and your business. 1. No matter how good a communicator you are, you will never be able to convey your business vision as successfully as a perfectly crafted business plan. It provides a clear understanding of what you want to achieve. This will allow you to express your thoughts in a clearer way. 2. Too often, business owners try to sell their idea verbally, and at the end of the interview with the bank, the manager is no wiser than he was at the beginning. I think you can guess the outcome of many of these requests! 3. A business plan will help convince you and the bank of the feasibility and viability of the project. There is nothing better than having all the facts in front of you to clarify the key issues. 4. There's no escaping the fact that a business owner who plans ahead appears more ambitious and focused. A well-prepared business plan demonstrates that you have a vision and know what you want 5. With many ideas running through your head, pitfalls or obstacles to success are never as visible. A mind buzzing and full of ideas rarely achieves clarity. A business plan forces you to put your ideas in writing and in an organized manner. This can result in you going in a completely different direction than you originally thought, or even abandoning your idea altogether. Not a pleasant thought, but what would you prefer? Loss of your hard capital or opportunity to rethink your idea? 6. It's an ideal tool for tracking progress against goals you've set for yourself (we'll cover goal setting later). By checking your progress against your plan, you'll be able to see if you're moving away from your original vision, so you'll know what needs to be fixed. 7. Imagine not having this control; An undetected change in direction or slippage in achieving your goals, if left uncorrected for too long, can be fatal to your business. On the other hand, it may turn out that a shift away from your original vision might be a better alternative, but at least recognizing that change allows you to adjust your course in a planned, structured, and controlled way 8. Every action you take has consequences, and a Plan helps those consequences much clearer. Being aware of the potential impact of your chosen direction will allow you to plan ahead, so you'll be better able to deal with whatever the world of self-employment can throw at you. That's one thing that "mental planning" wouldn't accomplish 9. When you put your thoughts down on paper, you may realize that more research needs to be done on the demand for your product or service. It could also highlight the need to do more research on your competitor's products or services. Further research could help you avoid a potentially costly mistake or even uncover a hidden benefit you haven't seen before! 10. The plan tells you how much money is needed to make the idea work. You may have a rough estimate in your mind of what you will need to commit, but until you do a Cash Flow Forecast, you may not realize that an overdraft limit will be required in addition to your equipment loan. If the mention of preparing a cash flow forecast makes you sweat, don't worry because later in the book I'll show you exactly how to do it 11. A business plan will help you raise funds. One of the main reasons why banks reject loan applications is the lack of information to help them make an informed decision. If a manager doesn't know enough about your idea or business, they won't feel comfortable enough to support you. Before they can say yes, they need to understand your business. At some point in the future, he may have to justify to his superiors why he loaned you the money, so he needs as much information as possible to support his decision. A business plan will make him feel more comfortable and able to say yes. 12. When you finish writing your business plan, you will have a complete understanding of your business; its strengths and weaknesses, the environment it operates in, what could potentially go wrong and what you can do to ensure your success. Back-of-the-envelope planning won't get you there By now, you should realize that having a business plan is essential; it can be the difference between success and that dreaded "f" word - failure! It's all about understanding the importance of planning ahead. Take the time to put your thoughts down on paper in a structured and logical way. It will pay dividends, both by getting you taken seriously by the bank and by securing the future of your business.