Why You Need A Proper Business Plan?

Writing a business plan can seem like an intimidating hurdle. You know that you need to put a plan together to start a successful business, but you find yourself staring at a blank Word or Google doc wondering what to do next.

It doesn’t have to be this way. If you’re willing to give up your preconceptions that a plan has to be a  traditional long, document that you spend a lot of time and energy on once and then file away, you’ll discover that there are better (and faster) ways to plan.

In fact, it’s possible to write your initial business plan in under an hour. I recently did this for a new product my company is working on and was able to quickly figure out our strategic goals and what it would take for us to be successful. Even if you’ve never written a business plan before, you’ll be able to do this too.

To write a business plan in 30 minutes, I use a process called Lean Planning to develop a much more useful Lean Business Plan.

A Lean Plan is faster and easier to put together than a traditional business plan, yet it provides all the value of an old-school plan. You skip all the long-form writing and instead focus on short, simple descriptions of strategy and tactics.

But, do you really still need a business plan?

The world has changed a lot since the idea of business planning was formalized decades ago. Things move much faster now and it’s easier than ever to get a business started.

So, it’s rational to think that startups don’t need business plans anymore. After all, you could just dive in and start building a business without spending much time thinking about your goals or how your business is actually going to work.

However tempting, starting a business without a plan is not a great idea.

  • It’s not just about funding. Planning is still a critical part of starting a business, but not for the reasons you might think. Most people think that the plan is all about showing it to other people to raise money or get a loan. But, that’s not the real reason planning is so important.
  • The process is what’s valuable. Writing a business plan is important because of the process you’ll go through when you put the plan together. When you plan, you discover what you need to do to start your business and what it’s going to take to be successful. Writing a plan is all about you, and clarifying your business idea for yourself and for your business partners.
  • Get clear and specific about your idea. After all, before you’ll be able to explain your business idea to friends, family, and potential investors, you’ll need to be able to explain your idea to yourself. The value of writing a business plan comes from going through the process, not from printing a document.
  • Reduce your risk. And, spending a little time on planning before starting your business reduces the risk that you’ll lose money and make silly mistakes. Your plan will help you discover if your business can actually make money and what you really need to make it successful. Sure, you could jump right in and start your business without a plan, but it’s much more likely that you’ll waste time, money, and resources—unless you have a plan.
  • Research proves it helps. Planning actually guarantees that you’ll be more successful. Over the years, there have been multiple academic studies of companies that do plan and those that don’t. And, time and time again, the results show that companies that plan are more successful, more likely to get funding, and more likely to achieve their goals.

Why you should write a Lean Plan instead of the traditional business plan

When you’re writing a business plan for yourself, you can do things differently.

  • To keep it simple and concise. For starters, you can throw out the expectations of a long, formal written document. You can skip all the formatting, complete sentences, and the paragraphs of text that few people will actually read. Instead, you should put together a Lean Plan that focuses only on what you really need to know to build a successful business.
  • To create a tool that is useful in the long run. A Lean Plan simplifies the entire process and makes your business plan actually useful. Instead of developing a long document, a Lean Plan focuses on distilling your business strategy to a simple, concise set of statements. It helps you set goals and then track your progress toward those goals.
  • To be more nimble. Lean Plans are also much easier to change when your plans change—and they will. Starting a business is full of changes in direction and strategy as you learn more about what works and what doesn’t. If you use a use the Lean Plan format, updating your plan will take minutes instead of hours.

What you should include in your Lean Business Plan

When you’re putting together your Lean Plan, think in bullet points and short sentences. The goal is to keep each section as short as possible. The ideal Lean Plan will fit on a single page so you’ll end up with a one-page business plan.

Here’s what to include:

  • Value proposition: If you’re at a party and someone asks you what your business does, can you describe it in a single sentence? Your goal is to communicate the value you are providing to your customers in a way that is as simple and direct as possible.
  • Market need: What’s the problem you solve for your customers? Why would they go out shopping for a solution? Why does your business need to exist? If you’re not sure, try talking to your potential customers and ask them what they might like about your products or services. Why would they choose you over other alternatives?
  • Your solution: Describe your product or service and why it’s better than the alternatives. Essentially, if someone asked you what you sell, what would your answer be?
  • Target market: Describe your ideal customer. Who are they? Be as specific as possible—age, gender, shopping habits, and so on. If you target different types of people, create market segments for each group.
  • Competition: Every business has competition. Who do your customers buy from if they aren’t going to buy from you? What makes your business and products better than the alternatives that are out there?
  • Funding needs: Nearly every business needs some money to get off the ground. Think about how much money you’ll need and how you plan on using it. Even if you’re starting your business with your own savings or using credit card debt, it’s a good idea to plan on how you will use the funds until you start making sales.
  • Sales channels: These are the places where you will sell your products. If you’re selling online, your online store is a sales channel. If you also have a physical store, that’s another sales channel.
  • Marketing activities: What will you do to market your business? If you plan on buying advertising, list the types of advertising you plan on doing here. Remember, different target markets might need different types of marketing activities to get your product in front of them.
  • Budget and sales goals: How much is it going to cost to run your business? What sales goals do you need to reach for your business to be a success? Don’t sweat the details to start and just think in broad strokes to get a rough idea of how your business will work financially. You can refine the details later.
  • Milestones: What are the major tasks you need to accomplish to get your business up and running? This will help you stay on track and meet your goals. Make sure to assign milestones to people on your team so you have real responsibility and accountability.
  • Team: Even if you’re starting out with just you, write a few quick bullets about why you’re the right person to run this business. If you need to hire key people in the future, list those positions as well, even if you don’t know who specifically will fill those positions right now.

ranjith

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