If you’re like a lot of entrepreneurs, you’ve probably wondered: Do I really need a small business plan?
The short answer: Yes.
But maybe not for the reasons you think…
The long answer is that, while the importance of a business plan is as great as ever, best practices regarding how your business plan should look has changed over the years.
Big picture, think of your business plan like Goldilocks’ porridge:
You don’t want it to be too detailed or too vague.
You shouldn’t spend too much or too little time creating it.
And it ought not be too restrictive or too broad.
Here’s a closer look at how to create a business plan that’s just right for your small business needs.
Small Business Plan – The Advantages
Having a business plan to guide your business offers benefits to both those inside the operation (even if that’s just you) and those who might help you from the outside (e.g., lenders, investors, and other stakeholders.)
Let’s start with how a business plan makes your day-to-day life easier:
- Clarifying short- and long-term goals: Are you starting a business just so you can sell it? Or to support your family long-term? Are you driven to pursue a passion? Or are you motivated to solve a problem? Are you trying to grow a team or are you okay with staying solo? Where do you hope you’ll be with your business in five years? Defining these things in a business plan helps give you clarity from the start.
- Relieving the stress of constant decision making: Owning a business is hard. You have to make tough decisions, minute after minute, day after day. With a business plan, you have a framework to guide those decisions: whether or not something helps you reach your goals.
- Prioritizing spending: Not sure whether to hire an accountant? Buy CRM software? Bring on a virtual assistant? When you have a business plan, you can spend money more confidently because you’ll know whether it’s helping you get where you want to be.
So do you need a small business plan?
The answer depends on how important it is for you to minimize the stress of owning a business.
Keep in mind, a business plan is a must-have document if you’re hoping to bring in any kind of external support, including…
- Angel investment: Business angels invest their own money in businesses they think will make money. You can read more about what angel investors look for in a business, but it’s safe to say anyone putting their money on the line is going to want to see a fleshed-out plan for how you’ll grow it.
- Small business loans from banks: Banks are notorious for their old-school formality, and lending to small businesses is no exception. But short-term bank loans often offer the quick cash infusion you need – As long as you can document your plans to repay it.
- SBA funding: SBA loans are some of the most attractive for small businesses because they require low equity and often have low-interest rates. But like anyone else, the SBA wants to invest where it sees long-term potential. One way to communicate that? You guessed it: a strong business plan.
- Partners: The importance of a business plan to attract partners can’t be overstated. After all, you’re asking someone to pour their heart and soul (plus time and money) into helping make your vision come true. Any partner who has the potential to take you to the next level is going to want to make sure you’ve got a plan.
- Employees: Okay, so potential employees probably won’t ask to see your business plan. But when you interview as a solo business owner, you’ll have to be able to communicate your vision and how a new hire fits into it.
- Buyers: Selling a business can be satisfying and lucrative. But those who buy businesses do so to make money. They’re going to want to see what makes you tick so they can keep the revenue flowing.
Write Your Small Business Plan for the 21st Century
The advantages of a business plan are many, but in modern business, the rules are changing.
These days, your business plan shouldn’t be behemoths that take six months to compile and almost as long to read.
In fact, most investors and underwriters prefer a couple punchy metrics in a one-pager as opposed to multiple pages of untested hypotheses.
If you’ve owned your business for even a week, you know that things change quickly and a fixed document that can’t evolve will soon be outdated and useless anyway.
Your business plan is important, but don’t spend so long here that you neglect the business itself!
Aim instead to create a plan that focuses on long-term goals, along with tactical supporting documents that you update regularly.