book.chapter Necessity of operating business plan

A business plan sets out your business model – how you will create value for yourself while delivering products and services your customers value. Your business plan is your roadmap on how to do that. A good business plan should be used daily. In addition to giving confidence to investors, studies also show that companies which have taken the time to write a business plan on average grow 30% faster than those which do not. The exercise of writing a business plan is good for you, because it makes you think through your business model and get specific. When you put together a business plan, several good things happen: You articulate and get down on paper where you want your business to head, or what you want to achieve by when. You can make a judgment call on the feasibility of your journey, and identify what will be the shortest path to your goal. You look at potential stumbling blocks, and identify what alternate routes might become available to you. You clarify what resources will be needed – financial, human, physical, or industry know-how. You have an opportunity to figure out the cheapest and most efficient methods to get your business up and running. You clarify in advance what the keys to success will be – understanding what customers want, packaging your product or service the right way, converting your offering into revenue, etc. Overall, the benefits of putting together a written business plan are quite compelling. The exercise of writing a business plan forces you to get specific about how you will produce and capture value. It's a roadmap for the journey ahead. A business plan is thus a platform that all stakeholders involved in the business venture can refer to for guidance regarding common objectives and strategies fashioned to attain these objectives. With this cautious approach, chances of failure are minimized. Each business venture undertaken is a calculated move that has been analyzed from various angles and has a high probability of success. The challenge with a business plan is if you come up with a 100-page document, very few people will ever read it, understand it, or use it. A much better approach is to put together a 1-page version of your business plan, that people can use and refer to every day. If you do that, as new ideas are bounced around each day, you can figure out which ideas to research more, and which will not fit your business model. Try putting together a single page business plan using the business plan canvas layout: where: P Partners – who you need to work with to make your business feasible and operational. A Activities – what your business needs to be doing to take off and grow in the future. R Resources and infrastructure – what you need to have in place in order to operate week to week. CR Customer relationships – how your business will attract the right customers and convince them to buy your offerings. C Channels – how you will get your product to customers efficiently and cost effectively. CS Customer segments – who are the customers most likely to be interested in your offerings. Your business plan should also describe your value proposition which details how you create and deliver value to customers, and also how you differentiate your offerings from those of competitors. Having all this information in one place will allow you to stay on track, and to be equipped to evaluate new ideas and opportunities as they may arise. The other good thing about having a 1-page version of your business plan is if you need to have a longer version to show potential shareholders or funders, you have a good framework to start with. You can add more detail to the 1-page version to make your business plan as long as you like. You have a structured way to describe the various parts of your business model to other people as required. Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion. The key in business is understanding exactly what the customer wants. Sure, you might have a good product idea. But if it is not what the customer wants, or if it is not packaged the right way, you will waste a lot of time trying to figure out how to convert this product into revenue. Creating a business model is not an overnight activity. It involves effort from several team members and research gathered from various sources over time. If not done properly, the model can become wieldy and complex, making it difficult to navigate. It is not easy to comb through and understand a business model that has hundreds of pages. The use of the business model canvas takes care of these issues.