Written by: Corey Harris & Julie Traxler, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
If you ask most current or even future business owners whether or not they need a business plan, “no” would be the most common response. The current business owner may think back to the one gathering dust in a closet somewhere, but they haven’t looked at it since they started since “Hey, you only need one to start a business.” The aspiring owner will likely say that it’s probably a good idea, but they won't create one unless they’re looking for a loan.
But, we’d strongly disagree. Strongly. The reason for the existing business owner is different from the aspiring entrepreneur, so we’ll break down from the start:
The Aspiring or Soon To Be Entrepreneur
We’ll knock one scenario out right now. It’s safe to say that most people know that if they start a business and need to approach a bank for a loan, they’re going to need a business plan. But if they’re bootstrapping or have a rich uncle floating them a loan, they may not think they “need” to create a business plan. Sure, they’ll think about it, but they may also think there are more important things to do than spend time typing away on a computer. The thing is, so many of those important things they need to work on should be built upon what is inside their plan.
For any aspiring owner, the business plan is the foundation of the business. It will influence their decision-making and help keep them true to what they set out to do. Plain and simple, the business plan defines what a small business is. Sure, it may look a little different if it’s not presented to an investor, but the sentiment is the same. There are many reason for someone opening a business to have a plan, but here are the top three:
First, it clearly defines what the business is. There are plenty of business owners who start with an idea and quickly find themselves with too many balls in the air or so little identity that they’re destined to run into major problems later. Without setting guardrails for their business, it’s easy to go in multiple directions and lose focus on the core of their business. Without clearly defining what the business is, they may find that their business has no differentiator after they open.
Second, it helps the small business owner determine what they want their culture to be. By writing down things such as the mission statement, core values, and a vision, they can create parameters for decisions down the road. A well-defined culture will help guide them in hiring and training the right people. It will create an identity that their target market will connect with. It will influence business decisions since they will know what is on-brand or not. Culture is not something an entrepreneur should guess at or pull out thin air. It needs to be defined.
And third, it will help them set actionable goals allowing them to create a plan to hit them. So many business owners set out to “make money” with no clear idea of what amount that is, how they’re going to make that unknown amount, or what will affect that amount like labor or cost of goods. These goals are set in a growth plan, and more importantly, the projected financials. Now, financials can be a scary word to some, but they’re something that shouldn’t be ignored, and any accountant can help with. Don’t ignore the financials.
Oh, and all of this applies to anyone who’s been opened for less than two years. It’s not too late to easily change direction before you get too far down the road.
The Current Business Owner
Let’s address the entrepreneur who’s been in business for a few years and probably forgot they even wrote a business plan. We would suggest the business plan is reviewed every year, but why do they need to? They’re successful. They’re making money. Well, it’s mostly for the same topics we talked about above, but for different reasons.
If you’re currently a small business owner, think to yourself about what you set out to do and where you are now. How many pivots did your business make? What opportunities were you able to take advantage of? What did you have to cut? There’s a good chance you own a different business than what the budding young entrepreneur envisioned. That’s why knowing what it is that you do and defining it, writing it on paper, is so important. It would be like setting off on a hike through a forest with no compass or GPS towards a destination. A long time later, you come across a GPS and locate your position. Do you think you’d be anywhere near where you set off to be?
Culture is another important reason, and that’s because culture can change. As people and society change, it makes sense that a business will adapt to that, but did the culture reflect that change correctly? Is it still relevant? Without addressing things such as core values every few years, it may be hard to find and retain the right employees because the culture doesn’t fit the pool of employees. Ensuring culture is relevant and well defined will help employees perform their roles better as well.
Reviewing Your Business Plan
While we encourage you to review your business plan annually, there are certain pieces that you’ll be working on outside of the business plan, so don’t think you need to rewrite the entire plan every 12 months. Hopefully, you and your team are creating projected financials regularly. Your marketing team keeps up to date with customer trends. You perform and analyze a SWOT analysis annually, and you’re well aware of what your ownership structure is. And, if you’re really swinging for the fences, you’re doing annual strategic planning, which covers much of what’s in your business plan.
The point is to take out the business plan regularly and compare it against where you thought you’d be and where you are now. Make sure your business is still in alignment with what you envisioned. And if you’re starting a business, don’t slack on the business plan. The few hours that it takes to create one will pay for themselves quicker than you think.
At SB PACE, we’ve worked with numerous clients to write new business plans and update existing ones. We’ve never had a client tell us, “that was a waste of my time.” It’s an exercise every business owner should participate in.
Julie Traxler and Corey Harris, Executive Contributors Brainz Magazine
Julie and Corey started their company, SB PACE, due to the 2020 pandemic to assist small businesses. Since then, they have expanded into helping start-ups, companies looking to improve, and small business mergers and acquisitions. They wrote the book on small business disaster preparedness and continued to help small businesses by leveraging their knowledge and experience working for Fortune 500 companies and Big Four consulting firms. Julie and Corey are the experts small business owners turn to when looking for sustainable, long-term success.