After graduating with an MBA, I thought I had figured out the way to ensure entrepreneurial business success. Up to this time, I had failed twice in operating a pair of businesses (an online travel agency and a network marketing business). One of the things that I did not value during this time was having a clear and focused plan. The courses I took taught me about business plans, but did not make clear the value of having a comprehensive. Over ten years later and various opportunities of working with and for entrepreneurs in addition to operating a consulting business, I’ve come to realize that without a clear and focused business plan, the owner and / or investor is well on his or her way to a quick dissolution and a possible material decrease in personal net worth. The purpose of this article is to reinforce the importance of taking the time to create a solid business plan and initiating the action to make it a reality.
Reason 1: Is the Business Opportunity Valid?
Too many times I’ve had the unfortunate privilege of talking about entrepreneurial opportunities with aspiring business owners with the only goal being the desire to make money. Don’t get me wrong, making money is great provided the motivation is right. Making money for the sake of having it only is a dead-end plan.
The business plan motivates one to give critical thought and time to a viable market opportunity that truly provides a solution to either a pain or need in the market. What judges whether a market opportunity is valid or not depends on the ability of the business owner to prove market demand. The best method of proving market demand is to disclose actual sales. The only way to prove a business’s ability to maintain for the long-term is to disclose a sustainable sales track record.
Reason 2: Where is the Business Going?
In addition to being able to prove the business idea viability by having sustainable actual sales, the business owner needs to have an objective for operating the business. No one just starts and operates a business for the kicks and giggles of it. Either as a way to build and extract personal wealth or as a manifestation of a life long calling, the business represents a vehicle for one to achieve an ideal goal.
The business plan provides a framework for one to disclose to investors, employees, and other important components of the business why it exists and where it’s going. I’ve learned that the business plan is a moving document in that it’s always in a state of revision. As the business continues to operate, it will achieve and overcome its initial goals. As time progresses and the market changes, the business will revise and updates its reason for existence.