Updated: Dec 30, 2022
If you're a first-time small business owner, you may wonder if you need a business plan. With all the work it takes to start a business, some new small business owners skip over this critical step to get their business off the ground. One of the biggest mistakes a small business owner can make is not creating a business plan.
A business plan is an essential investment in your small business. For example, you need a business plan if you want loans or investors. Without a business plan ready to go, it can be
A hurdle is keeping your small business from moving forward. Additionally, a business plan contains many essential details that keep your small business on track toward both your short-term and long-term goals.
Why Do I Need a Business Plan?
A well-done and thorough business plan increases your odds of being a successful first-time entrepreneur. One scientific study showed that over 70% of fast-growing companies have business plans.
If you think of your business as a highway, there are many routes to get from point a to point b (your goals). A business plan is a roadmap showing small business owners how to obtain the desired destination and what steps are needed. The better the roadmap, the smoother the journey!
A business plan typically includes a detailed description of your business, such as how it will operate, market research, marketing strategies, an assessment of your main competitors, your target audience, and financial forecasts. It also includes the financial needs of your small business- what you need to keep your doors open and operations running smoothly.
80% of small businesses fail due to poor cash flow. The old motto rings true: failing to plan is planning to fail. Whether you are a new small business owner, a young generation first-time entrepreneur, or a seasoned small business owner looking to take your business to the next level, a business plan is a must. Putting in the work to create a business plan is an investment in your small business guaranteed to pay off. Still unsure whether your small business needs a business plan? Check out our top 5 reasons to create a business plan below.
1. Engage Investors and Get Funding to Start and Grow Your Business
If you're looking for funding for your small business, you need a business plan to show investors and banks. Perhaps investors never ask to see your entire business plan, but they will ask you questions you can quickly answer when you have a well-executed business plan in your back pocket. Most will want to know your costs and see expected sales forecasts. Not having those answers ready to go shows you haven't taken the time to plan for your small business thoroughly. An executive summary in your business plan is similar to an elevator speech for your investors- it outlines your mission statement, business details, and products or services. Pricing, financial forecasts, benefits to the consumer, and any patents or proprietary technology are also factors investors consider when looking to work with a small business.
2. Develop Marketing Strategy
One essential component of a business plan is the marketing portion. This part of the business plan entails how your small business will get people to buy your product or service sustainably to make your business profitable. A few key marketing strategy components in a well-thought-out business plan include competitor analysis, marketing, sales plans, and market analysis. A specific marketing strategy is also developed that explains what your small business will do to get customers to buy in desired quantities. When creating a marketing strategy, some things to consider include the market segment, reasons your small business is unique, pricing philosophy, and market research plans. Lastly, understanding your small business's target audience is typically included in the market strategy portion of a business plan.
3. Understand Your Target Audience
Your target audience refers to the consumers likely to want your product or service. Your small business may target a specific niche or broader market. Essentially, once the target audience or market is known, ad campaigns can be tailored and directed to generate results. Understanding your target audience is essential for achieving marketing ROI on your efforts. Knowing your small business's target audience also allows for authentic relationships and better communication with consumers. In an Epsilon poll, 80% of consumers said they are more likely to do business with a company if it offers personalized experiences. Furthermore, 90% indicated they find personalization appealing. It pays to know your target audience, and having a business plan allows you to consider your specific market.
4. Set Important Goals
It is important to remember: no small business is alike. Defining the short-term and long-term goals for your small business help keep you focused during the day-to-day hustle of running a successful business. Creating business plans makes room for the thought process of what goals you hope to achieve as an entrepreneur. Do you want to increase brand awareness for the first two years? Open three new office locations within five years? In your business plan, your small businesses' goals are written to support activities contributing to the company's ability to move forward. Whether that's increasing revenues, decreasing costs, or improving customer experience and brand awareness, having goals written down within a business plan influences motivation and focuses on achieving desirable outcomes.
5. Attract a Dream Team
As a young startup company, bringing on talented, new, dedicated employees can seem impossible. Why should someone risk their career to work for you without results or a program? Having a business plan shows prospective employees your business strategy and development plans. Employees feel confident joining your team and working toward common goals. Everyone starts on the same page with a clear understanding of the small businesses' short-term and long-term goals.
It's Never Too Late to Create Your Business Plan
If you are a small business owner and have yet to create a business plan, it's never too late to start! Many small businesses benefit from creating a new business plan. Existing small business owners already know about their customers and what their needs are versus new entrepreneurs. The business plan for an existing small business evolves around more proven data and fewer assumptions.
Unsure how to help your small business get off the ground and run? Contact us today for a free small business consultation.
About The Author
Kristin Burke is a small business marketing expert, author, and urban gardener. As a former food truck owner of Chicago's first schnitzel truck, she has first-hand knowledge of launching a small business successfully. She has been a writer for various small business blogs since graduating from the University of Chicago in 2008.