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Business Planning - Why Plan?

Provided by Buzgate.org Small Business Resource Referral Network, content partner for the SME Toolkit.

Minimize Risk ~ Maximize Outcomes

Discover how planning for your business success can minimize risk and maximize outcomes.

By:  Dr. William R. Osgood

Why should you go to the trouble of creating a written business plan? There are at least three major reasons:

  1. The process of constructing a business plan, including the thought you put in before beginning to write it, forces you to take an objective look at your business project in its entirety.
  2. The finished product, your business plan, is an operating tool which, properly used, will help you manage your business and work toward its success.
  3. The completed business plan communicates your ideas to others and provides the basis for your financing proposal.

By taking a critical look at your business, you can identify areas of weakness and strength, pinpoint needs you might otherwise overlook, spot problems before they arise, and begin planning how you can best achieve your business goals. Your business plan helps you to establish reasonable objectives and determine how to best accomplish them. It also helps to highlight problems as they arise and aids you in identifying their sources, thus suggesting ways to solve them. It may even help you to avoid some problems altogether. Finally, your business plan provides the information that will be needed by others to evaluate your venture, especially if you need to seek outside financing. A thorough business plan automatically becomes a complete financing proposal, which will meet the requirements of most financiers.

Business planning establishes the framework for business success. It enables the development of a logical and coherent plan of action for any business. It does require knowing what to do and how to do it. It does require developing a program and following it. However, all of this can be quite straightforward. The objective here is to show you what needs to be done and how to do it.

Effective business planning entails time and effort. However, in order for your plan to work, it is important that you do as much of this work as possible. If you are already in business, taking time to plan may seem impossible. Nevertheless, while you can hire people to do the work in your business, you cannot hire someone to do the planning. Others can assist you in the process, but the plan is for your venture and so must be based on your ideas and assumptions. A professionally prepared business plan won't do you any good if you don't understand it thoroughly. This essential understanding comes from being involved with its development for the outset.

No business plan, no matter how carefully constructed and no matter how thoroughly understood, will be of any value unless you use it. If you are not in business but are trying to determine whether or not your business idea makes sense, or if you are getting started, the planning process outlined in this book is your most important task. It will help you avoid mistakes saving you effort, time, and money. Going into business is difficult at best. Over half of all new businesses fail within the first two years of operation; over 90 percent fail within the first ten years. A major reason for these failures is lack of planning. The best way to enhance your chances of success is to plan and follow through on your planning. Don't feel that the plan was written for your financing sources; this may well be an important function, but it is secondary to the action implications. Above all, don't put it in the bottom drawer of your desk and forget it.

Your business plan can help you avoid going into a business venture that is doomed to failure. If your proposed venture is marginal at best, the business plan will show you why and may help you avoid the high tuition of business failure. It is far cheaper not to begin an ill-fated business than to learn by experience what your business plan could have taught you at a cost of several hours of concentrated work.

Plan what's going to happen - then do it.

Copyright (c) Knowledge Institute, Inc., 11 Court Street, Exeter, NH 03833, USA
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