One of the first questions entrepreneurs are faced with are whether or not they need a business plan.
There are two thoughts on this. On the one side you have people advocating the need for a business plan, and on the other are those who maintain a business plan is not necessary.
In my experience, you should definitely have a business plan. Whether you are an experienced entrepreneur or someone just starting off in business, whether it’s a start-up or an existing business.
Statistics show that entrepreneurs with a business plan have a 70% higher chance of success, and an 95% higher success in attracting funding.
When you look at every successful business, they all have a clearly defined business strategy, risk mitigation strategy, sales and marketing strategy, operations strategy, as well as detailed financial forecasts. These are all components of a proper business plan are they not? Even large businesses spend millions of dollars on technologies to help them forecast sales, market penetration, production, operations, cashflow, profits and losses, capital expenditure, etc, etc. Why would you not do you own planning?
If I had to ask you what your customer acquisition cost will be in 6 months, or what your cash flow will look like in 12 months, or maybe how much capital will be spent or staff hired over the next 24 months would you be able to answer those questions? How about your forecasted EBIDTA or valuation? Maybe even how many units you will be producing in 8-months, and the impact that would have on cashflow, or how many customers you will have in 18 months?
Yes, these figures will change, and yes you will need to adapt your plan weekly or monthly to accommodate the changes and see how that impacts your goals and compares against your original plan. That is why a proper business plan is a living document.
Whether you are starting a lemonade stand, a small business or growing an existing business, you need a business plan with the proper forecasting, strategies, and goals in place to ensure you are successful.
The difference really is what type of business plan you need, and how detailed it should be. Very successful entrepreneurs with lots of experience do not need to go into the detail that someone starting off or with less experience needs, but either way they need a business plan.
There are mainly two types of business plans:
Operational Business Plan
An operational business plan is extremely detailed, and lists every strategy, risk, and forecast across every area of your business. This is a living document that the entrepreneur will create and amend as the business progresses, and track the business’ progress against that business plan, constantly revising forecasts with new data.
Investor Business Plan
An investor business plan is essentially a summary of the operational business plan that can be given to investors when you are looking to attract funding for your business. This is often presented to investors along with a Pitch Deck and Executive Summary. This business plan can not be created without first doing an operational business plan.
The biggest challenge for entrepreneurs though is being able to put together a business plan that will actually help them. With so many different templates on the internet, it can be really confusing, and having a template does not explain to you how to put it all together, and most do not cover all the aspects you should cover.
Entrepreneurs should either take a course on creating a proper business plan (See the course “Step-by-Step guide To Creating A Solid Business Plan”), or engage the services of a Mentor to help them (See the article “What Is A Mentor And Do I Really Need One”).
Do not become a statistic but rather do proper planning and increase your chances of success by clearly defining your goals, strategies and forecasts in a proper business plan.