The majority of new businesses don't survive their first five years, and a stunning one-fifth fail within a year. There are a multitude of things that keep a business from succeeding, and one common thread for most that fail is they didn't have a solid business plan in place.
Why does that matter? In short, because a business plan is not just a great tool to outline your expectations for the business, but it also helps you to measure its performance. Lacking a business plan, many business owners never see impending failure until it's too late to do anything.
In short, emphatically yes, the vast majority of businesses, no matter how simple or straightforward they may seem, would benefit greatly from a business plan.
What is a business plan?
In short, a business plan describes what the business will do, where it will do it, how it will do it, how much it will cost to do it, and where the money to do it will come from. A business plan should cover a three- to five-year period. A solid, well-thought-out business plan isn't a rigid set of rules that defines exactly how your business will perform, but it should provide meaningful guidelines so that you can regularly review how your business is evolving and performing against your expectations, and whether the actions you have outlined are delivering the results you expect. It can also play a role in helping you adapt to changes, and to help you stay on track at meeting your business goals.
The biggest reason for a business plan is to stop yourself from making mistakes
Another way to think about a business plan is that it should help to remove some of the emotion from making hard decisions. That's something every small-business owner will face, and having a business plan to help guide you through tough decisions can lead to far better results. The bottom line is, when you start a business, you invariably put a significant amount of yourself into it, both in terms of money and time. This investment can make it very difficult to make the most rational decisions, particularly when you face adversity.
A solid business plan can be a reality check many business owners need, and it could help you avoid making the decision that "feels" right in the heat of the moment but doesn't help move the business forward. When you put your heart, soul, and hard-earned money into something, placing yourself in the best position to make rational decisions is critical. That's where a business plan can really pay off.
Put yourself -- and your business -- in the best position to succeed
If you start a business, you have to know your "walk away" limit. Is it money you can invest into the business? Time before it generates a certain amount of profit? A solid business plan can help you identify this limit, and to establish guidelines that, as you become more emotionally invested in the business, can be harder to acknowledge without a business plan.
A business plan can also make a huge difference when it comes to growth. When you run a business, it's easy to get lost in the "job" of running the business and not see the bigger picture. A business plan can help you step back from the day-to-day things that can cause you to miss out on opportunities, and think -- and act -- strategically to better grow your business.
Bottom line: Starting a business without a business plan does you no favors. With so many free resources available today, it's never been easier to put one together, and it's a powerful tool that can guide you through the hardest, most-important decisions you'll make. If you want the best shot and growing a successful business, build a business plan, and then use it to succeed.