Many entrepreneurs view business plans as outdated documents that are only useful for impressing venture capitalists or bank loan officers. However, even a simple business plan can be a powerful tool for any business, regardless of its size or stage. It can serve as a roadmap, help align your team, and even assist in shaping your brand’s message.
The Young Entrepreneur Council, a nonprofit organization made up of promising young entrepreneurs, shared their thoughts on why a business plan is a valuable asset, even if you’re not seeking financial backing. Here are their insights:
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Clarity: Writing a business plan or investor deck can help you think more clearly about your business direction. However, remember that your business plan will be outdated the moment it’s printed, so don’t rely on it as a to-do list. Instead, use it as a roadmap.
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Understanding Your Market: Creating a business plan can help you understand your industry deeply before you enter it. It can also force you to consider how your business will fit into the market and assess its chances of success.
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Organization: A business plan can help you stay organized and on track. Without a plan, businesses can easily lose focus, which can negatively impact revenues. A plan with expense projections, revenue forecasts, and more can help a small business stay committed to its long-term goals.
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Practice: Writing a business plan is a great mental exercise. Even if you discard it after completion, the process will force you to consider aspects of your business that you might not have otherwise.
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Math Verification: Many ideas sound great on paper and in discussions, but simple math can make or break an idea. Before launching any new idea, it’s important to create a financial model to project the ROI from several realistic scenarios.
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Ironing Out Kinks: Writing a business plan allows you to think things through thoroughly. Your plan should question the validity of your ideas, the target markets for your product/service, and more. It should force you to do your own due diligence.
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Alignment: Writing a business plan is an ideal way to ensure that everyone on your founding team is aligned with the current and future plans for the business. It’s crucial for founding team members to be on the same page as they work together to move the business forward.
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Accountability: A business plan is a great tool that allows founders to articulate their vision and future plans for their company. Once these are down on paper, they can serve as a guide to track your progress and hold yourself accountable for the future.
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Messaging: Business planning is incredibly helpful for describing what you do, understanding who your competitors are, and crafting a realistic three to five year plan. Each of these activities is crucial if you are looking to launch or expand a venture.
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Establishing Benchmarks: Business plans are a valuable, iterative document that can serve as a successful benchmarking tool. Having something in writing puts the onus on you to be honest about your company’s performance.
