Starting a business is one of the most exciting periods in a young entrepreneur’s life. The moment he or she has that billion dollar idea that will change society forever, all they can envision is developing that idea into a product or service and sharing it with the world. Every young entrepreneur dreams of starting the company that becomes the next Facebook, Twitter, or AirBnB; or gets acquired by an investor for millions of dollars. However, few actually get to experience this dream. Majority of new businesses (or startups) fail within three years, many failing within the first six months. Even if a startup makes it past the three year mark, it’s no guarantee that it’ll ever become self-sufficient or profitable. Typical reasons that startups fail range from lack of funding to inadequate leadership, but, in my opinion, the number one reason that so many startups fail is
because so many young entrepreneurs fail to prepare a business plan before starting their business.
Not writing a business plan before starting a business is one of the worst mistakes a young entrepreneur can make. You can’t start any task or project without a plan of attack, and a business is no different. Many feel that writing a business plan is just a waste of time, but in this article, I’ll show you why writing one is indeed necessary if you want your startup to grow into a successful business one day.
A business plan is the foundation of a business
A well-crafted business plan is the foundation of any and every business. There are so many internal and external factors that affect startups; it’s imperative that each one have a written document that defines the purpose, mission, vision, and overall strategy of the company. As a startup grows and expands in size, it becomes more difficult to pilot. Hiring new employees, extending the product line, utilizing more marketing channels, increasing the budget, and acquiring more customers can have a negative effect on a startup if it doesn’t have a strong foundation. A business plan ensures that growth doesn’t ruin the company; without one, the initial goals and objectives can become compromised, or even forgotten.
A business plan is the blueprint of a business
In the architecture world, a blueprint is a design plan; it illustrates how an object will be built. In the business world, a blueprint isn’t exactly a design plan, but it’s similar. A business blueprint is a strategy for the company; it describes the purpose of the company, the management team, the product (or service) the company will sell, the staffing it will need, the marketing strategy, and the sales strategy. It’s important for every startup to have a blueprint because it displays the inner-workings (or framework) of the company. Executives need to be able to see how the different departments will work together in order to execute the overall mission and vision of the company.
A business plan is the research before starting a business
Completing a business plan (before starting a business) ensures that you, as a young entrepreneur, have done all the proper research necessary to run a successful startup. Conducting research is very important; researching facts and figures about the industry you intend to operate in and on the customers you intend to engage with will almost guarantee that you’ll create an effective, market penetrating business model. Doing research also prepares you for every scenario that could arise. A business environment is ever-changing; new opportunities and threats sprout up daily. It’s crucial that startups have strategies for every scenario that could occur. You can never be too prepared.
A business plan is the picture of a business
A business plan is like an invasive, transparent picture of a business; it shows everything. It shows the purpose of a company, its goals and objectives, the management team, its research reports, the product (or service) line, its marketing strategy, sales strategy, and its financial projections. It shows you a company’s mission, vision, strengths, weaknesses, and the overall profitability potential that the company has. It’s the first thing investors look at when evaluating a startup; it’s the first thing bank executives examine when offering lines of credit or loans. And similar to a picture or photograph, a business plan tells a story. It reveals the intentions of a business and explains (to the public) how it plans to improve their lives and society as a whole.
All in all, a business plan is just what its name entails; a plan for your business. Every business, whether it’s a startup, small business, or multi-million dollar corporation, needs a plan, and a plan is nothing more than a list of steps or procedures needed to achieve an objective. Without a plan, a business will operate aimlessly, executing countless strategies until it wastes all of its resources and eventually fails.
P.S, a business plans isn’t set in stone; it should be revised and updated annually to reflect the present business environment.
-Mike, creator of EntrepreLoser