Full disclosure, I’ve taught business plan writing in both a short-form 6 hour workshop and a long-form 18 week class, where each session was 3 hours. Previous to that, I was skeptical of formal business plans. I was under the impression that all business plans had to be 40+ pages in length and that every element of the standard template had to be populated. Now I know better.
In my defense, if you were launching a business that would have a physical location, would hire employees, manufacture products and most of all, require that you ask a bank for money then yes, absolutely, I would have encouraged you to write a business plan. But for those who would operate as a Freelancer who do maybe PR or graphic design, then my feeling was (and still is), that your business planning must center on figuring out how you’ll get clients. A comprehensive marketing plan is the document of choice and that would include a sales and pricing strategy as well.
Business owners have been known to build successful ventures without writing down a single word. Their businesses are typically small and self-financed, maybe with some additional backing from friends and family. Particularly if the operator has already run a business, even one that failed, it is possible to learn valuable lessons to apply to a new venture. Business plans are time-consuming to write. Some will say, just learn by doing. Why not create business strategies on an as-needed basis and test them in combat?
A study of 11,046 companies published in 2010 found that planning resulted in improved business performance of existing companies even more than that of start-ups. It was hypothesized that leaders of existing businesses knew their customers and the business environment more thoroughly than those at start-up companies. Leaders of existing ventures had more information, so there were fewer faulty assumptions born of inexperience.
Another study found that while many businesses can succeed without significant planning, leaders who plan, run businesses that grow 30% faster and are overall more profitable than those that don’t. The link between business planning and growth was reinforced by yet another study that found that 71% of fast-growing companies, that is, companies that showed a 90% + growth is sales over a 12 month period, were led by a team that planned. Creating marketing and sales strategies, setting sales goals and creating budgets made the difference. So did defining client needs and the company’s value proposition.
As you may have guessed, a business is less likely to fail if there is a plan in place. A study of 223 companies demonstrated that business planning could not guarantee business success, but rather decreased the occurrence of business failure.
Realize that plans are not etched in stone, but are intended to be guidelines that should be adjusted as necessary. Identify key metrics and track your company performance to learn if your assumptions stand up to your business environment. If client needs are changing, then observation of your metrics will cause you to respond and pivot and keep your products and services relevant in the marketplace.
A credible start-up business plan, or existing business strategic (long-term) or operating ( one year) plan, need not be long and elaborate. Keeping it lean and focusing on client needs, defining your value proposition and business model, spelling out goals and the strategies that will get you there and identifying metrics that demonstrate either success or the need for adjustments will do your business a world of good.
Start-up entrepreneurs were reported to be 152% more likely to actually start their businesses when they took the time to develop a credible business plan. If you want to make your dream come true, research and write down how you intend to do it.
Determine precisely how you will obtain customers. An operations component will make you consider carefully how you will obtain, produce and deliver the products or services you plan to sell. Devise a marketing and sales strategy before you approach prospects, so that you will know what to say to those who would become customers. Finally, acknowledge the amount of money that will be required to open the doors and keep them open as you build your business by developing a realistic financial plan for your enterprise.
Thanks for reading,