Do you really need a business plan? Is it worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?
Good questions. Here’s everything you need to know.
1. It’s essential if you’re seeking a loan or investment
If you’re asking a bank, angel investor, or private lenders for funding, they’re going to want to know that you have a good handle on your small business’s trajectory.
You don’t need to write a 200-page document, but you will need something to hand to your banker or investor that shows that there’s a market for the problem your business solves and includes your key financial statements and forecasts.
Your business plan should make it simple for potential partners and supporters of all kinds to understand your business model and financials. It’s even better if you’re able to present data visually through charts and graphs.
LivePlan makes this easier by walking you step-by-step through the process of setting up and forecasting your financials—without complicated spreadsheets—so you can present your numbers feeling confident that you’ve put them together correctly. It’ll even create all the charts and graphs you need automatically so you can create an impressive plan, even if you’ve never done it before.
2. Business planning is proven to help you grow 30 percent faster
Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and be successful.
Business planning is about regularly setting goals, tracking your progress toward those goals, and making changes to your business as you learn more about your customers.
You don’t have to just take our word for it. Studies have proven that companies that plan and review their results regularly really do grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful statistics on businesses that fail, or that experience cash flow crises that threaten to close them down.
3. You’ll make big spending decisions with confidence
As your business grows, some of the best problems you’ll have are figuring out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.
These are major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.
4. You’re more likely to catch critical cash flow challenges early
The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together with your business plan. (The other two are your balance sheet and your income statement (P&L). Reviewing your cash flow statement regularly as part of your business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.
5. Having a business plan minimizes your risk
When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations.
As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can do to reduce your risk. Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans.
LivePlan makes it easy to compare your actuals against your forecasts when you connect an accounting tool like QuickBooks or Xero. LivePlan automatically pulls in real-time actuals so you don’t have to wrangle spreadsheets—or worse—do manual data entry to see your financial performance.
From there, you can seamlessly adjust your forecasts and make adjustments in your business (marketing, sales strategies, production, inventory) as you learn what works and what doesn’t.
6. It’s a solid foundation for strategic planning, prioritization
Your business plan is a great place to map how your sales and revenue goals fit with your expense budget. Drawing a clear connection between what you’re investing in and the results you hope to achieve will help you make sure that you’re setting yourself up for success.
A business plan makes it easier to get everyone on your team on the same page. You’ll be able to explain, in simple terms, how you think you’ll get from here to there.
Rallying your team to align toward the same priorities will increase your efficiency as a whole. You want everyone on your team to see the big picture and understand your larger goals. You need their buy-in from the beginning, and as you progress, you want to make it easy to track and communicate on your progress.
If everyone on your team knows how their piece of the work impacts the larger company, the more invested they’ll be in meeting your goals because they’ll know their part of the work really matters.
LivePlan produces digestible reports that you can share with your team, so they can see how things are actually going. That sort of transparency helps everyone plan and prioritize, connecting the dots between the tactical work and the impact it has on your revenue.
7. It will help you set achievable goals and milestones
Every good business plan outlines SMART goals and milestones. SMART goals are:
If you create a business plan but skip attaching any goals or milestones to it, it’s a lot less useful. If you set goals and milestones for your company and your team that aren’t aligned with the strategy you articulated in your business plan, you’re going to have a hard time aligning your team around the same priorities.
Use your business plan to set high-level milestones. Then use those milestones to create meaningful goals, and guide your sales and marketing strategies.
8. Your business plan is an asset if you ever want to sell
Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale.
How to get started
The importance of having a business plan and reviewing it regularly goes far beyond simple planning and goal-setting. The key is to just get started. It’s really not as hard as you might think! It doesn’t have to be a formal business plan that’s 200 pages long—or even 20—and you don’t need to spend months on it.
It’s even possible to create a business plan in under an hour. And there are a lot of resources available to make it easier. Download this free business plan template, and get a free sample business plan for inspiration.
For guidance all along the way, tutorials, and educational content to help you create your business plan, check out LivePlan.
LivePlan’s dynamic template walks you step-by-step through the planning process. With intuitive fill-in-the-blank inputs, simple but powerful financial forecasting, and beautiful business plans that impress investors, you’ll go from template to complete business plan in no time.
LivePlan takes the pain out of the entire business planning process, helping you track your performance as you grow, defining the tasks you need to get your business to the next level, and even making it easier to compare your plan against the competition.