Business Plans 1: Why Write a Business Plan?

As an entrepreneur, one of the key characteristics of our occupation involves starting and growing businesses from little finances to sell, or to develop a system that creates a passive income (as opposed to an active income).

Starting a business from scratch is not as easy as people perceive it to be. There is a lot of work involved both in the development of the business, and working within the business to make it succeed. One thing that helps to improve the success of a business throughout the initial stages is the creation of a business plan.
Why, as an entrepreneur should I or anyone else create a business plan?
There are several reasons for writing a business plan:
  • Clarify why you are starting a business.
  • Determine what you intend to offer clients
  • Plan how the business will operate.
  • Develop an execution strategy.
  • Provide a document that outlines your intentions for obtaining finance.
  • Determine a number of aspects relating to your market, your competitive advantage, your skills and expertise, your exit strategy, your finances and economics, and much more.
A lot of people start a business with no real idea of where they are heading. This is like going for a drive with no intention of going anywhere in particular- you will make a decision to go somewhere in the end, but a lot of time and resources will be wasted in the process.

The first two questions an entrepreneur should consider when planning to write a business plan are as follows:
  1. Why am I going into business?
  2. Why am I writing a business plan?
Determine why they are going into business.
Many people start a business with the dream of working for themselves, with no boss breathing down their neck every five minutes and the ability to spend time with their family while making a higher income and working less. There is nothing wrong with the idea, but has it been written down and made into a series of workable goals and objectives?

Write down what you intend to achieve going into this business. This could be a series of points, such as follows.
  • Work less hours (time leverage).
  • Earn more money.
  • Be my own boss.
  • Make a difference in the world.
  • etc.
Write down a list of about five major reasons, and then expand on each in a paragraph. This will help clarify in more detail specifically what your goals are from your business. Eg: Work less hours: I am starting a business with the view to working in around a schedule that incorporates my family, and eventually plan to scale my working hours back to 25 hours a week. I am prepared to work longer during the initial stages of development to ensure that I can achieve this goal in x amount of years.

If you currently have a business and are not achieving the goals you have set, why haven't you? Have you not been focused, lacked direction or just been mismanaging time?
Determine why they are writing a business plan.
The next step as an entrepreneur is to determine why you are writing a business plan. Is it to:
  • Obtain finance?
  • Clarify your operations procedure?
  • Determine whether the business will work?
  • Re-evaluate an existing business?
  • Another reason?
Write half a page on why you're writing a business plan, outlining what you intend to achieve from having a plan. If you don't have an intention for writing a plan, then write down how writing a plan will potentially benefit your business, along with the reasons why you have not intended to write a plan before.

A business plan does not have to be 100 pages, it can be as little as 5-10 pages (my ideal is approximately 20 pages). It does however need to match the criteria you plan to achieve in constructing the document (I.e.: If you are writing to give clarity on overall information regarding operations and marketing of your business, it needs to meet this goal. If you are trying to obtain finance, it needs to contain all the necessary information to be able to get the amount of money you are after.)