Everyone’s heard the story of the overnight success, a business that made it without so much as a second thought, much less a business plan. Those extreme rarities aside, taking the time to actually plan your new business in advance can provide a range of significant advantages.
Here are the key benefits that formulating a solid business plan can bring you:
1. Better understand your market(s). Any good business plan includes thorough demographic, economic, and behavioral analyses of your target market(s). Who are these people? What floats their boats? How much will they spend to satisfy their needs and wants? Who else is competing for their dollars? The better you understand the answers to these questions, the easier it will be for your small business to succeed.
2. Clarify what you’re trying to accomplish. One of the big reasons that small businesses fail is their owners’ hazy vision of what the company is — and is not — supposed to be. It’s just as problematic to have a mission that’s too narrow and easy as it is to have one that’s too broad and difficult. Developing a business plan gives you an opportunity to focus on a target that’s just the right size for your enterprise to support without asking the impossible of yourself and your team.
3. Set benchmarks for accountability. A well-conceived business plan establishes the roles of each person on your team. This lets you ensure that all the important responsibilities are covered and set goals for each person’s desired results.
4. Catch mental and math errors. Running any business can involve great complexity. As a result, you can get sideswiped by unintended consequences that flow from what you assumed were straightforward decisions: For example, failure to comply with local ordinances could limit your plans for how you’ll do business. A simple math error in your income and expense projections could seriously cut into your profits. Or you could drive away customers with higher-than-necessary prices. A business plan helps you catch any such oversights or mistakes before they come back to bite you.
5. Keep everyone on the same page. Clear communication and understanding among your team members are basic elements of business success. A written business plan supplies your entire team with a central source of information about priorities, choices, opportunities, strategies, and more. No matter how often your tactics have to shift, everyone can use the fundamental business plan to stay on track.
6. Solve problems sooner. In one sense, running a business is essentially an exercise in solving problems for customers, suppliers, operations, finances, marketing, and so forth — one after another. Once your small business is up and running, you must address these issues in real time. If you take the time to write a business plan, you give yourself opportunities to identify potential problems earlier and work to minimize their impact.