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Are Business Plans Useful?

So what’s the deal with business plans? Do they serve a real purpose or is it simply a document people need to fulfill loan requirements. The reason I’m asking is that it’s a question that’s often asked or implied when the topic of business plans comes up. Is a business plan really useful?

Well, for starters, a good business plan should serve as a blueprint for every aspect of your business. It should guide you with your business and help you establish targets, goals and objectives that otherwise might not be thought out carefully. Business plans reduce the time spent making decisions. How many employees do you need on certain days? Who is responsible for equipment maintenance? How much cash-flow do you need on hand to keep the business running? What margins are required for you to make money? These are the types of things that you need to be prepared for so you can knowledgably make decisions for your business. Business plans should help improve communication between all members of the business by creating a sense of common purpose for the people involved. It should get everyone thinking about strategy, thinking outside the box and thinking inside the box. Basically, it’s to get everyone thinking about all key components of the business.

A business plan should involve both the business owner and the party responsible for developing the business plan. I don’t think people realize how important the process of developing a business plan is. The best business plans are developed with the full involvement of the business owner.  A good developer poses questions and guides the business owner to make decisions on their own. We’ve had clients thank us for posing questions that led them to build solutions through brainstorming and team exercises.  Clients have mentioned that the process of building the business plan is as important as the final document itself. Think of what’s involved in building a house. Overall, most people know what a house looks like and what its built of. But you wouldn’t go out and build a house without the aid of an architect and blueprints. So why would you invest hundreds of thousands of dollars in a business without first putting the time and effort into a business plan?

At the end of the day, a business plan won’t be the reason for your success or failure. It cannot guarantee success and its not going to increase your bottom line. Its meant to help you make decisions, be prepared for barriers and risks involved, and to get you thinking strategically about the details of your business. A good business plan will show investors that you’ve spent the time and effort in developing something you believe in. Its something that you can look back to and use during the lifetime of your business. A good business plan is something you will update and change over time so it will always remain useful for your business. A business plan is the first investment in your business, and it should be a good one.

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  • RajaK February 3, 2010, 12:48 am

    Great first article Nav.

    “The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand”- Sun Tzu

  • Nav Khinda February 3, 2010, 11:45 am

    Thanks for your comment!