Do You Really Need a Business Plan?
Starting a simple small business is very much like a roller-coaster ride. It has many ups and downs, twists and turns and sometimes heart pounding excitement. It is definitely thrilling and scary at the same time. In the midst of hundreds of things to do for a new start-up, one can get lost in unnecessary tasks or even lose track of the important things. In order for start-up founders not to lose their sight on important things, it is imperative to have a business plan. Even if that business plan is on a napkin or a single sheet of paper.
Business plans are like roadmaps or blueprints. They provide start-up founders with a direction, and necessary information to form correct action plans to use at different stages of the business.
Many business books and business scholars talk about why you need a business plan and how to go about creating one. The rule of thumb seems to be to ask the creator to predict the future and to create a five-year plan describing everything that will happen in detail. However, a lot of successful start-up founders today will disagree with this approach. Simply because five years is too long to create a definite and certain plan (see “How To Create a One Page Business Plan“). This approach just doesn’t take ‘uncertainty’ into consideration.
Economic situations change all the time. Market requirements vary with the seasons. People’s attention and demands shift constantly. Production powerhouses are shifting from one country to another. New competitors will enter into the scene, old ones will get stronger or consolidate. In such a dynamic changing world, how can a five-year business plan stay relevant and provide a strong and clear direction?
Nonetheless, a business plan is a must-have for any start-up. It provides not just a direction, but also serves as an important tool to know which stage your business is in. It can also come in handy if you have to raise funds for your business. No banks or investors will think about investing in your company without a business plan.
So if five-year business plans are ridiculously worthless, what kind of planning should you have? The answer, a one page business plan.
A one page business plan is a simple business plan that focuses on key components of a company. Basically, rather than going through extensive information about each section and just putting in five year forecasts which will always become useless later, the plan will focus on what really matters.
“Things That Truly Matter”
We will briefly explore what truly matters and is important to be included in a simple business plan. It is important to cut the fat and get down to the real meat.
1.) Know Your Market. This is very critical and important. Marketing is the only activity that brings in revenue for your business, while all other activities are expenses. If you don’t know your market, know your customers and know their demands, your business is doomed.
2.) Know How to Reach Your Market. It is imperative to have a proper plan on how to reach your market. Now that you know a lot about your customers, you just have to find ways to reach out to them.
3.) Know Your Competitors. If you want to go extensive in your one page business plan, this is where you should go into in-depth research. Knowing your competition is as important as knowing your customers. You should know who are your direct and indirect competitors, how and what they are doing in the market, and who are their customers. Knowing them will empower you greatly.
4.) Have Milestones. Milestones help you know which stage your small business is at. It is also a motivating factor that will keep you going. Set major and minor milestones so that you can work your way towards them one step at a time.
5.) Financial Forecast. While five-year financial forecasts can be ridiculous, this section is a must-have so you will know your potential cash flow. Without knowing your cash flow, you are going in blind. You will need to know, or at least anticipate, all your future expenses. Financial forecasts also help you know when you will break-even and when you will begin to profit.
6.) Operation Plan. You really don’t have to go into deep details here. But you still need to know what operations you will need to do and how you are going to handle them in alignment with your marketing and financial forecasts.
“Develop Action Plans”
Now that you have your one page business plan, it is time to put it into action. Business plans are just like blueprints. One page business plans are no exception either. You need to use them as a general guide for your business, and develop action plans in accordance with changing situations and your own plan.
Don’t be afraid to change your business plan to reflect changing external factors and stay realistic. Pivoting is necessary if you want to be successful in business.
Most business plans collect dust inside a drawer after initial weeks are spent to write one. A simple one page business plan will prove to be far more useful and consulted than their heavier counterparts simply because they provide enough meat without all the fat.