What is the Purpose of Your Business Plan?

Once they get past “writer’s block“, most people just start writing their business plan.

Bad mistake…of the twelve things to avoid in a business plan, that is one of the first types of common errors.

Before you write a word, ask yourself this one question:

“What’s the point of my business plan?”

If your purpose isn’t clear, your plan won’t be clear. Even worse, it may try to be “all things to all people.” Any successful business needs focus, and your business plan needs to be focused on its purpose. There are many different reasons to write a business plan. These reasons include:

  1. Obtain Financing
    • Show me the money!
    • Will you make enough money to satisfy the funders?
    • How do the investors get paid out?
  2. Test the Business Model
    • Will the business actually work?
    • When will you run out of cash?
  3. Resource Planning
    • What staffing do you need for the forecasted revenues?
    • How much inventory?
    • What’s the production capacity?
  4. Goal Setting
    • What is the target?
    • When will you get there?
    • How will you know when you’ve got there?
  5. Communications to Stakeholders
    • Are you talking to bankers, employees, suppliers?
    • What are the objectives?
    • How will you accomplish them?
  6. Defining Strategies and Tactics
    • Do you know the difference?
    • Are there tactics to implement the strategies?
    • Are there orphan tactics that don’t map to a strategy?
    • If so, why are you doing them?
  7. Understanding the Opportunities and Challenges
    • SWOT analysis
    • Are you even aware of the challengers?
    • What is the plan to handle them?
  8. Gaining Competitive Insight
    • Who are your competition?
    • How much business do they have?
    • What are their stats?
    • What are they good at?
    • How are you better than them?
  9. Improving Knowledge of Customers
    • Who are they (Demographics)
    • Where are they (Geographics)
    • How do they think (Psychographics)
    • How much do they buy?
    • How much are they worth to you?
    • What does it cost you to get one?
  10. Risks and How to Mitigate Them
    • What are the internal risks?
    • And the external risks?
    • What’s the market risk?
    • The political risk?
  11. Selling The Business
    • How does the business really work?
    • Who does what?
    • And how?
    • And when?

As you can see above, there are many reasons why you might need a business plan. Doesn’t it make sense to think about the reasons and then to write the plan appropriately? You can have a well-written plan, but a plan that’s aimed at selling the business should be completely different from a plan that’s aimed at the stakeholders.

The Dirty Dozen Business Plan Mistakes – A series by Barry Sharp, Expert Business Plan Writer & Business Consultant.