Why do I need a business plan?

Why do I need a business plan?

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I’m starting my own business and have downloaded business plan templates from your website. But it seems like a huge amount of information is required and it’s going to take me ages to complete. Exactly why do I need a business plan?

Starting, and developing, a sustainable business takes more than just a good idea, a superior product or great trade skills. Being the very best electrician, fashion designer, or website developer may cause you to be an excellent employee in a company, but it will not guarantee that you will be able to grow a successful business of your own.

An employee only needs to focus on his specialised role in the company, but a business owner needs to focus on every single aspect of the entire business.

You need a map to success

Building a business is like building a house. Can you imagine building a house without any designs or drawings? Or starting to build without first raising sufficient money to complete the house?

This is no less foolish than trying to build a viable and sustainable business without first sitting down and planning every aspect of your business. How many people could successfully build a house if all they had were some building materials and a picture in their mind of what they wanted their house to look like?

Sadly, this is exactly what happens to so many small businesses in South Africa. They start out with a good idea, some resources and practical skills, and they begin their businesses without any further planning or research. A recent survey revealed that only one in five small businesses manage to survive beyond three years.

 

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There are many reasons why businesses fail, but in most cases, these failures could have been avoided if they had developed a comprehensive business plan before starting their business.

As with building a house, you will need to plan and develop beyond the scope of just your area of skill or expertise. Being a great bricklayer will help you to build the walls, but you will need more than just bricklaying skills to successfully complete the entire project. Similarly, having a skill, or a thorough knowledge of your products and services, will help you to build your business, but you will need more than just this to be successful.

Things to think about

  • You will need to research your industry, market and competition.
  • You must consider your marketing strategy, target market, ideal location
  • Know your potential customers “needs” and “wants”
  • What are your operational and management structures?
  • You must consider the financial components of running your business. This includes properly costing your products and services, preparing a realistic cash flow forecast and sourcing any required start-up finances.

How many financing institutions would give you a loan to build a house if you were unable to produce proper building plans, architectural drawings and a detailed cost analysis? Similarly, financiers will not give financial aid to your business if you are unable to present a detailed business plan.

A DIY plan is best

It is important that you write your own business plan, and not just pay someone to draw one up for you. Successfully running your own business requires you to know the very fabric and heartbeat of your business, being personally familiar with every aspect of it.

Take the time, effort and energy to personally research, plan and develop the best possible business plan for your new venture.

This is probably one of the most important things you could ever do for yourself and your business!

A business plan is not as difficult as it sounds. There are many great resources out there to help you to draw up a good business plan. If you are going to take the risks, and make the sacrifices, of running your own company, then you cannot afford not to develop a thorough business plan.

Start by breaking it down into its various components and focus on one at a time. Do it yourself, but seek advice and mentorship from others who have experience. Keep working on it, and keep reworking it, until you have developed the best possible business plan for your business. This will be one of the greatest factors in ensuring the success and sustainability of your business.

Peter Gossman
Peter Gossman is a business trainer at The Hope Factory. He began his career in engineering after graduating with a BSc in Electrical Engineering in 1989. He later started his own company and, over the years, he has started and run four different companies and organisations. His primary passion in the area of business is to train and equip entrepreneurs to grow successful and sustainable businesses.