Running a business can be unpredictable, which is why having a solid business plan as a foundation is vital to surviving and thriving in the early days of your startup. Eric Butow, CEO of online marketing ROI improvement firm Butow Communications Group, has teamed up with Entrepreneur Media to write the second edition of our best-selling book Write Your Business Plan, providing you with a roadmap for success.
In the following excerpt, Butow explains how a well-thought-out plan can power your startup and help your vision come to life.
Business plans could be considered cheap insurance. Just as many people don’t buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas, intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.
1. A plan helps you set specific objectives for managers.
Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.
2. You can share your strategy, priorities, and plans with your spouse or partner.
People in your personal life intersect with your business life, so shouldn’t they know what’s supposed to be happening?
Order Write Your Own Business Plan Now and Get 1 Month of Free Access to Business Planning Software Liveplan Premium
- Easy step-by-step business plan generator
- Built-in financial calculators
- 500+ sample plans and templates
3. Use the plan to explain your displacement.
A short definition of displacement is, “Whatever you do is something else you don’t do.” Your plan will explain why you’re doing what you’ve decided to do in your business.
4. A plan helps you figure out whether or not to rent or buy new space.
Do your growth prospects and plans justify taking on an increased fixed cost of new space?
5. You can explain your strategy for hiring new people.
How will new people help your business grow and prosper? What exactly are they going to do?
6. A plan helps you decide whether or not to bring on new assets.
How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what’s going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.
7. Share your plan with your team.
Explain the business objectives in your plan with your leadership team, employees, and new hires. What’s more, make selected portions of your plan part of your new employee training.
8. Share parts of your plan with new allies to bring them aboard.
Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.
9. Use your plan when you deal with professionals.
Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.
10. Have all the information in your plan when you’re ready to sell.
Sell your business when it’s time to put it on the market so you can help buyers understand what you have, what it’s worth, and why they want it.
11. A plan helps you set the valuation of the business.
Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. Usually, that takes a business plan as well as a professional with experience. The plan tells the valuation expert what your business is doing, when it’s doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.
12. You can use information in the plan when you need cash.
Seek investment for a business no matter what stage of growth the business finds itself in. Investors need to see a business plan before they decide whether or not to invest. They’ll expect the plan to cover all the main points.
To dig deeper, buy Write Your Own Business Plan and get 1 month of free access to business planning software Liveplan Premium.