Entrepreneurs are a diverse and passionate bunch of people.
There are just as many reasons why people start their own businesses as there are people on the face of the globe, but through all of the creativity and individuality there are a few common threads.
One, however, stands out among the rest.
Entrepreneurs, down to the last one, are passionate. Successful entrepreneurs are creative, determined, and resourceful. But all entrepreneurs are passionate.
Which is good, right?
Passion is an engine that drives entrepreneurs forward with singular purpose. But that energy needs to have a path if you want to turn it into a successful, sustainable business.
I like to think of entrepreneurs as runners in an endurance race. Passion will get you to the starting line, it will give you the burst of energy you need to get ahead of the pack, and it will keep the finish line in your sights. But without a plan to conserve your energy and with no consideration for the running surface or the twists and turns of the race’s course, you will collapse halfway through.
Passion will get you to the starting line, it will give you the burst of energy you need to get ahead of the pack, and it will keep the finish line in your sights. But without a plan to conserve your energy and no consideration for the running surface or the twists and turns of the race’s course you will collapse halfway through.
Writing a business plan and thinking critically about your business concept isn’t the most fun part of being a successful entrepreneur. Just like training isn’t the most fun part of running a race. But both are equally critical to success.
A runner who doesn’t train will have a much harder race ahead, and the chances of success are slim. The same goes for an entrepreneur who dives into a business concept without a business plan.
If you are a new entrepreneur, or even a wantrepreneur, here are the top five reasons you need a business plan.
5. A business plan is a test.
Everyone is the hero of his or her own story.
Which is good. The person you most look up to should be the one you see in the mirror. But this can also cloud your decision-making process when it comes to understanding your own strengths and weaknesses.
There is a common saying that refers to an idea that sounds good, but probably won’t do well in the practical world: "That idea sounds good on paper."
Writing a formal business plan for your concept is committing it to the first real stress test that it will face. The process of researching your needs, setting your expectations, and viewing your business concept through the lens of an investor acts as a trial run for feasibility.
Writing a comprehensive and robust business plan is not the kind of thing that is done in a day.
A business plan is an organized, structured, and well-researched manifestation of your passion and creativity. It is a roadmap for you to follow, and it is a communication tool that you will use to convince investors that what exists in your head should not only exist in real life, but also be successful.
What do you think will happen if your business is all passion and no direction?
Researching your customers, your market, and your needs helps give shape to your business concept. At this stage, you are making the transition from your head to paper and seeing if everything still makes sense as a viable business.
4. A business plan is a learning tool.
If you are a new entrepreneur, or even a veteran of the business world, you don’t know everything there is to know about a topic.
No one does.
The process of writing your business plan is a valuable discovery period. Learning and discovery is an amazing process, and one that is absolutely critical to practice every day.
While learning about the business that you want to start or expand, you will find that the process of discovery yields two products:
The answers to questions you already had
New questions that you didn’t know you had
A business plan is a valuable learning tool that uncovers information you knew you needed, in addition to uncovering new questions you hadn’t thought to ask.
While the ultimate goal of your business plan is to become the blueprint of your business, the process of writing one will help you gain a fuller understanding of the environment in which your business will exist.
Writing a business plan isn’t exactly fun, but if you are passionate about the central core of your business, you will enjoy learning more about how to make it become a reality. Ultimately, there is no downside to knowing as much as you can about your business and the world it will inhabit.
Just remember, at some point you do have to stop writing your plan and get out there and start delivering value to customers.
3. A business plan is a strategic document.
At its heart a business plan is exactly what the name implies: a plan for your business. And unless you are a solopreneur (someone who runs a business completely by themselves—sounds lonely) your business has people.
These people are relying on you as the decision-maker to provide guidance and leadership. Your people can handle the day-to-day stuff, but what about the stuff that’s coming around the corner?
A business can’t grow without goals, and it can’t reach its goals without a strategy. A business plan is many things (as this list demonstrates); however, it is ultimately a strategic document that answers the following questions:
How exactly are you going to pay the people who will be working to help you build your business?
How exactly are you going to get the word out about your new business?
How exactly are you going to turn your customers or clients into raving fans?
The answers to these questions are for you as the main decision-maker, but they are also for people within your organization and for investors or other third-party stakeholders.
A business plan is a strategic document that reflects THE PLAN, and without a plan all the passion that you as an entrepreneur have stored up inside of you might not get you where you want to go.
Remember that business plans are living documents—they are not written in stone.
This means that as the conditions on the ground change—and they will—you are constantly updating and adjusting your business plan to reflect new information. It may seem that a steady stream of new challenges means your business is struggling, but the reality is that new challenges mean growth.
If you are always facing the same limiting factors, then your business is getting stagnant. Growth means facing (and overcoming) new challenges.
2. A business plan is a communication tool.
Perhaps in the future we will be able to communicate with our thoughts, but for now we rely on more traditional forms of communication.
A business is a concept with a lot of moving parts, and a well-organized business plan that is clearly written is a highly effective communication tool. Entrepreneurs are known for their self-reliance, but the truth is that no one does what they do alone.
Those of us who strike out on our own do so with the support of friends, family, and colleagues. We also cultivate success by forming relationships with complete strangers, such as investors, vendors, and other professional contacts.
Being able to succinctly communicate exactly what it is your business does, exactly how it solves problems, and exactly why it is a winning proposition is invaluable toward building the relationships you as an entrepreneur need to survive and thrive.
This isn’t just about your investment pitch.
It is about winning over the hearts and minds of your audience with clear summaries and important details, and by providing the answers to their questions before they come up. This audience could be outside investors, potential partners, or even members of your own organization, such as managers or supervisors.
How well do you think a plan will be executed if no two people are on the same page?
1. A business plan is a launchpad.
When the time comes to talk to people about your business, your plan is a launchpad. Looking back on our list, once you have completed your plan you will have completed the following:
Tested the feasibility of your business concept by exploring your potential customers and market
Learned about the environment in which your business will operate and what your funding and organizational needs will look like
Planned and strategized the processes and systems that will drive your business forward along with set goals and objectives
Communicated exactly what your business will do and how it will do it better than the competition
All of these activities have been done in a structured and organized way, and they haven’t just been exercises.
At the end of all of it you have built a working business plan that can be used to request funding, woo partners, and guide you and your management team through the process of starting your own business.
Business plans are launchpads because they force entrepreneurs to ask critical questions and look at key elements of their business concept in a structured way. Nothing is left out or forgotten, and the final product is a strategic learning and communicating tool.
The questions that a comprehensive business plan answers will need to be answered one way or another if you are starting your own business. I think you will agree that it’s better to have all those questions answered before getting started than to end up figuring them out “on the job.”
The Bottom Line
These key aspects of a business plan should make it clear that if you are an entrepreneur then you need a business plan.
Business plans are essential for understanding the concrete needs of a business concept in the transformation from daydream to drawing board, and for learning, planning, and effectively communicating your new business to investors.
Most importantly, your business plan is a launchpad for your future success. It is a guide, a blueprint, and a roadmap all rolled into one.
Benjamin Sweeney is the Senior Business Writer for ClydeBank Media who specializes in the wide and wonderful world of business and process optimization. He has an appetite for waste reduction and an eye for efficiency. He has authored two titles on the subject of Lean manufacturing, both available from ClydeBank Media.