While every business starts with an idea, and many start with great ideas, not all business succeed. The challenge is to build a company that does more than sell a product or provide a service. And, the challenge is more than building a profitable business. The ultimate challenge is to build a business that you love.
If you are going to succeed by building your ideal business, you must know where you are starting, where you want to be, and how you will get there. To do that, you need a clear, well-defined, guide.
That guide is your business plan. Think of the plan as your business’ Global Positioning System. In fact, if you are serious about reaching your long-term goals, your business plan is the best tool that you can have.
The business plan describes your operation in detail. It defines how you will operate, your marketing strategies, the nature of your competition, and your financial structure.
The problem with business plans is that sometimes they become larger-than-life. If you read any book on how-to-start-your-own-business, it seems that the business plan is the key to fulfilling your ultimate destiny. Conventional wisdom will lead you to believe that your business plan is supposed to be the panacea for all of your business matters — a true miracle. And, like any miracle, the ideal business plan is nearly impossible to find.
Well, if the true business plan is as mythical as the unicorn, why bother? In the words of Dwight D. Eisenhower, “[I]n preparing for battle I have always found that plans are useless, but planning is indispensable.” The same holds true for your business. The business planning process is essential. It forces you to take the time to form a vision of your entire operation, from the type of entity you will use, to the type of building you will occupy, to the kind of printers you will buy. You will determine exactly how much you need to collect in order to pay your bills, and you will figure out what events will signal the end of the road.
The resulting written business plan will be useful for two reasons. It will describe the fundamentals of your business idea and it will provide the financial data to show that you will make good money. It should also address all of the major elements of the company’s operation, outline its specific goals and objectives, and show which strategies and tactics are necessary to reach those goals.
Whether or not you need to raise money to start your venture, preparing financial forecasts is essential. The process of making financial projections for your business, including estimated start-up costs, break-even analysis, profit and loss forecasts, and a cash flow projection will help you decide if your company is worth starting or if you need to re-structure your foundation assumptions.
A well-constructed business plan dramatically increases your odds of succeeding and it helps you make money from the start by:
- Providing an estimate of start-up costs and how much you will need to finance or invest;
- Showing lenders why they should fund your company;
- Helping define your market and your market share;
- Helping compete by defining your competition’s weaknesses; and,
- Identifying problems before they become disasters.
In short, the business plan shows where your company starts, where it is going, and how it will get there. A good business plan will show you that starting your own company is the right thing to do – or not.