Many of us when seeking to start out on the entrepreneurship process see the development of a business plan for the new business as a ‘necessary evil’ – that is – something we do because we have to do. After all, business school teaches that you have to come up with an impressive business plan, if you are to get the money you need to start your own business.
And from this perspective, many of us develop business plans targeted at others (particularly the potential financiers) other than ourselves. Indeed, many people who have the money they need to start their businesses or people who are getting into ventures where they don’t have to go looking for capital from external financiers often opt to get headlong into business, without bothering to develop a business plan first, now that they don’t need one for financing reasons. Needless to say, the businesses started by these people make a good portion of the more than 90% of new businesses that fail in their infancy.
The true position is that a business plan is not just a tool you make to impress financiers, though this is of course one of the major purposes it serves. Even if you have all capital you need in the world, you would still be advised to take your time and develop a good business plan, before starting business. As such, even before it gets to impress potential financiers, clients and suppliers, the first person who needs to get edified by the business plan, and the first person to whom it should be targeted is the new business owner himself or herself.
The process of developing a business plan – even when you don’t need one to present to the financiers and other external stakeholders – will get you to objectively face the viability of your business idea. If you look carefully at the facts and figures that the ‘projections’ sections of your new business plan reveal, and particularly listen carefully to what the figures have to say (numbers don’t lie) you stand the opportunity to know honestly judge whether your new business idea is viable or not, and if it happens not to be viable, get the opportunity to save yourself a lot of future grief and frustration that entrepreneurs who choose to get into business without proper business planning expose themselves to.
The process of developing a business plan also gives you the opportunity to have a long and hard look at what the motives for starting your own business are – which is important because businesses started with the wrong motives form a significant portion of the 90% of businesses that are die in their infancy.
And finally, the facts and figures that the process of developing a proper business plan forces you to confront can help in bringing you in touch with the reality of just how much you need (in terms of resources) if your endeavor at starting business is to be successfully accomplished. Now this understanding can in turn help you to work out whether you can – realistically – mobilize these kinds of resources, which would be important for you to know (or at least have an insight into) beforehand, because a considerable percentage of the businesses that fail do so because the owners didn’t anticipate just how much in terms of resources they would be required to pump in for their businesses to take root.