Monday, 19 October 2009

Planning ahead: arguments for writing a business plan early

Virtual Blue Bird, a recognized provider of management support services, often works with entrepreneurs who have just recently launched their own business. They come up with all sorts of questions asking for advice and guidance. Drawing on our vast experience of helping business start-ups survive we have learnt a lot about how and why new businesses might fail. This has pushed us to share our experiences for the benefit of all of the new business owners and budding entrepreneurs. Today we would like to discuss when you should consider writing a business plan.

In many cases, managing directors start writing a business plan long after they started the business in order to get extra funding. If you write it at that stage it might already be too late. Moreover, if you require extra funding that usually suggests that something has already gone wrong and you need the extra money to mend the problem. If you do not want it to go wrong unexpectedly, you simply must write up a business plan as early as possible. And you have to do it for yourself even more than for your investors. A business plan provides clarity and a direction for your business development. In fact, studies show that businesses that have a business plan to follow generate higher profits.

So, as soon as you got a somewhat clear idea of what your business is going to be like, start writing. While writing and answering various questions about goals, missions and penetration strategies you will quickly improve your personal understanding of what it could be like and what you might expect to happen. By carrying out simple marketing research you will find out about your competitors and will be able to see your own competitive advantages more clearly. Learning about your target audience and their needs will eventually help you formulate you marketing strategy and roughly predict the sales. Furthermore, when you start writing about cost, pricing and break-even you will see for yourself if the business can be profitable or would simply be a waste of your time.

A business plan also allows you to allocate resources for your start-up. Be it the number of staff or any other finite resources you will be able to see clearly how much of the work can be done and what you should be prioritising. Writing up a business plan will also show you which of the tasks can be outsourced or delegated.

The last but not least of the advantages of having your business plan early is the ability to make everybody aware of your future plans. In order for a team to be working in the same direction, they need to be aware of the goals you have set for the business. Inspiring a shared vision has always been one of the most effective leadership tools that the business plan helps you make use of.

Having a business plan ready before you set out on your entrepreneurial adventure will enable you with a clear vision of future challenges and a realisation of the direction that you intend to follow. Being informed will therefore save you money, time and energy that you can otherwise invest in the growth of your business.

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