We have all heard the adage started above, but how true is it in business. According to the Small Business Association (SBA), 50% of firms fail inthe first year and 95% fail within 5 years. While different firms fail for different reasons, it usually can be tied back to the lack of planning. For example, insufficient capital can be tied to a deficit in financial planning and poor inventory management can be tied to poor operational planning. Thus, if you want to be in the 5% of businesses that succeed, planning is a must.
The main objective in preparing a business plan is to define the purpose of your business. This includes creating a mission, vision and value statement that ensures you stay focused in the appropriate areas. This focus can help you create a culture that attracts both employees as well as customers who are loyal to you and your company.
The process of writing a business plan is important for a number of reasons. It helps the owner think through every possible situation that could occur in business. For example, if you are a web-based business, what happens if the server malfunctions? Or if you have a retail location, who will purchase your inventory from should your supplier go out of business? What happens if you grow to fast and cannot handle the inquiries for your product? Become the devils advocate for yourself and think through how your business will operate if you were not there.
Writing a business plan is also important if you are looking for investors. This document is necessary, as investors want to know that you have done your due diligence and are serious about doing the work necessaryto ensure your business idea succeeds.
It is important to remember that a business plan is a living document. Trends, situations, and circumstances change everyday and the effect on your business can be huge. Once the plan is completed, review it periodically and measure your real progress against your projected results. If variances do occur, try to figure out why they occurred and how to change your activities to garner the results you need.
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