A business plan is like a big jigsaw puzzle with different pieces that need to be put together before a business owner gets a picture of what things will be like. Here are the 10 reasons to write a business plan before commencing operations:
1. To prove you’re serious
If you’re trying to secure business financing or you’re applying for a business and innovation immigration visa, you need to prove you’re serious about your business and that you know your stuff. Your application will be scrutinized to assess your risk and your argument for approval needs to be watertight. The approving people will cross their t’s and dot their i’s to make sure they think you’re the real deal.
2. Understanding your market
Possibly the biggest challenge for many start-ups and other businesses is tapping into their target audience and a lot of people don’t know how to find them. Industry reports from suppliers such as IBISWorld Reports are a great source of information. If you are a member of your local library you’ll find you have free access to many reports.
Local city council websites are a gold mine for information around who lives in your council and it will help you determine if your audience is close by or maybe you need to venture further out.
As well you need to understand whether or not the people you think want your product actually do want it. Researching information about the various demographics will really help you determine where your actual audience really is. Asking questions from people in your target audience will give you great insight into understanding if you’re on the right track or not.
3. Putting your ducks in a row
Smooth business operations can be interdependent. One thing needs to happen before something else can take place. A business plan breaks down your business into its components and requires you to think each aspect through. For example, you might have created a great marketing calendar that will bring in a lot of business but operationally, will you be able to handle the workload? Matching marketing activities against operations means that you can hire more staff if you need to handle the influx and prepare financially for it in your profit and loss forecasting.
4. Prevents brand damage
Sometimes businesses can become unstuck when they’ve gone to market too soon. Without really considering their business and all the aspects involved, some business owners can find themselves upsetting customers by providing poor service for example. Another example is where businesses haven’t really understood their target clients and didn’t communicate acceptably.
This can affect your brand and damage your reputation in the marketplace which is very hard to win back and can cause potential lost earnings.
5. Saves money
Knowing where you’re going is far more profitable than being in a constant reactionary state where the market is pulling you around by the hair metaphorically.
Pumping money into marketing activities that really don’t provide a return can be mitigated by the marketing section of a business plan.
The competitor section of your business plan helps you keep track of who you’re competing with directly and indirectly and by doing this you can stay ahead of the game.
It’s harder and more expensive to repair your business than to take the time to think of all aspects of your business through and be proactive.
6. Does it all add up?
A solid profit and loss projection includes all the costs associated with running a business including simple things like bank fees and interest incurred. It will cover your utilities, insurances, superannuation contribution, vehicle running expenses and the list goes on.
When you’ve thought about the price you want to charge for your services, decided realistically the volume you can see being sold and deduct all the above-mentioned expenses including the cost to make your product, you’ll get a very clear picture of where you stand financially.
If the numbers add up, so does your business.
7. Can you really do it all?
Identifying all the business activities involved will help you determine what you can do and what you need to outsource or hire internally. It’s unlikely a business owner can do it all.
Once you’ve looked at your organisational structure it’ll be clearer what you’re capable of doing and what you need help with and how much it will cost.
8. What happens if I get really sick?
Let’s face it, life’s unpredictable. You might get really sick or injured. What happens to your business? Clients have deadlines, you have bills to pay and possibly staff as well. A good contingency plan will have considered this and will come into play immediately in case the worst happens. Business can continue to roll until you’re better.
9. Stops you from breaching laws and regulation
Do you run a café that sells alcohol and plays music? There are regulations around what you can and can’t do in that scenario and many others that you need to be aware of. All of these are covered in a business plan so you won’t get a fine in mail!
10. You know what you’re in for
Finally, the business plan process really gives business owners a clear understanding of what they’re in for. Particularly for first time business owners it’s important to really understand as much as you can about what it means to run a successful business. All the enthusiasm in the world won’t make a business work but a realistic view of what’s involved will help you decide if it’s a good idea to proceed or not.