Existing companies need a business plan too. I’ve also heard them called a strategic plan, annual plan or operational plan. The name is not important. A business plan is the roadmap between where you are now and your vision. Developing this roadmap provides you with important benefits. Entrepreneur.com emphasizes their importance, saying that with an annual strategic plan you can:
- Guide your growth. Your business will grow or not depending on a lot of different factors, including overall economic trends, location, specific market needs, hard work and other elements. Businesses that plan do it to guide and influence their growth so they move proactively toward defined objectives rather than just reacting to business events.
- Manage priorities. Strategy is focus. Allocate resources where they’ll do the most good. Work toward your strengths and away from your weaknesses. Develop the company by doing the most important things according to your long-term objectives.
- Assign responsibilities. A plan gives you a place to develop organizational responsibilities.
- Track progress. Think of a plan as a business-positioning device. With a plan you can track your progress toward goals, measure results and manage the business. Without a plan, how do you tell whether or not you’re moving in the right direction? What do you measure against?
- Plan for cash. Profits aren’t cash, and cash isn’t intuitive. You spend cash–you don’t spend profits. However, businesses don’t plan well for cash, and they need to. That may not sound strategic, but it is. It’s also the core of an operations plan and an annual plan. Whatever else, you have to plan for cash.
In addition, a business plan provides a way to communicate your operations, goals, and business philosophy to personnel, suppliers and your other business contacts.
Finally, a plan helps you attract and retain talent. When a prospect asks to understand your business, you can hand them a plan that gives them an entire overview. Their reactions tell you something about how quickly and thoroughly they can think through your business’s key issues. Moreover, the written record of your goals coupled with a track record of delivering against those goals sends a message loud and clear. You understand your business and can deliver the results you promise. Great employees will respond to that message–as will banks and investors the next time you need to raise money.
The plan improves your chance of success by identifying a strategy and all key assumptions. Importantly, it identifies market trends and explicitly calls out the bets that the company is making about the future. If more businesses did better planning, failures would be fewer.