Have you ever taken a vacation without any planning? Do you leave for the airport without checking on traffic, confirming your departure time or packing your bags? What about reserving a hotel? Even the most laid-back, spontaneous travelers generally conduct some degree of planning. If they don’t, a trip will likely encounter some serious roadblocks.
When it comes to your business, your approach should be anything but spontaneous. A clear business plan can be the difference between a successful, thriving business or a directionless, failing one. Although you should expect the plan to grow as your business does, drafting an initial business plan helps aspiring business owners establish if the business is possible — and worthwhile. Determining the feasibility of your business in this phase may spare you lost time and money, as well as free you up to draft your next — and hopefully more feasible — business plan.
However, creating a helpful, well-organized business plan is complex, as is modifying and iterating that business plan when circumstances change and the need arises. Every bit of knowledge you gain about subjects like strategic planning, business development, management, entrepreneurship, budgeting and finance, and organizational leadership can be critical to successful business planning and execution. You can develop this expertise and maximize your strategic planning efforts through advanced studies in the online Master of Business Administration (MBA) program from Florida Institute of Technology.
Reasons Why You Need a Business Plan
Why is a business plan important? Whether you intend to start a fair trade business, a data center company, or a manufacturing plant, the reasons behind creating a business plan are the same. Not only can a clear plan avoid the pitfall of a business on a poor trajectory, but it can also guide thriving new businesses to stay on budget, prepare carefully for expansion and demonstrate a better case for getting a business loan. After all, a business plan is one of the documents you’ll need to present to make your case to lenders.
To continue with the vacation analogy, if you don’t establish your intended destination, it will be difficult to know when you get there, or where you want to go next. A comprehensive plan is your business’ roadmap. With a business plan, you can benchmark your successes against the plan, and decide if you need to pivot, set new goals or focus on changes that can help you achieve existing goals.
Even with agile start ups that thrive on constant iteration, a business plan is key to moving forward intentionally and efficiently. A good business plan is not necessarily rigid. Rather, it incorporates the flexibility the business model demands, leveraging that flexibility for growth measured through the plan’s benchmarks.
Core Business Plan Requirements
Ultimately, a good business plan is about taking control. If it feels overwhelming to answer every question related to your business, take heart. Your business plan may simply ask all the questions, answer a few and keep you in control of your business’ direction such that you can make good decisions.
Essentially, a business plan establishes your company’s goals and how you intend to achieve them. According to Investopedia, the essential elements of business plans generally include:
- Executive summary: An introduction to the company, its mission and other essential, relevant information
- Products and services: What you plan to offer, along with related information such as pricing, consumer demand, production, manufacturing and patents
- Market analysis: How your company fills a need in the current market, including target audience and relevant research on competitors
- Marketing strategy: The strategies and campaigns you will use to engage and retain customers as well as intended distribution channels
- Financial plans and projections: Outline financial estimates and targets, and provide historical financial information (for existing businesses)
Effective business plans may also include discussion of the management and operations plan, personnel, business development strategy, overarching objectives, potential risks and risk management plans. Many resources exist to help you devise an effective business plan. For instance, the U.S. Small Business Administration (SBA) provides a step-by-step guide for creating a business plan. Plus, of course, you can develop expertise in strategic planning through advanced business management studies in an MBA program, such as Florida Tech’s 100% online offering.
5 Reasons Why You Should Update Your Business Plan
While a clear plan is critical to launching a successful business, it is equally important to maintaining that business. Executive leadership must regularly review the business plan and its details to keep the company on track and maintain momentum in the right direction. Regular review of the business plan is also critical when adjusting processes, goals or strategies if something isn’t working or if a new opportunity arises.
When certain events occur, it can also be critically important to revise your business plan. Businesses grow and change in ways the initial plan may not be able to accommodate. External change and disruption can also render aspects of a business plan obsolete or require large-scale pivots that necessitate revising goals and strategies. The following are five of the many common reasons to update a business plan:
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When your business undergoes internal changes
Adding a partner or owner, changing or adding locations, or product or service launches (or removals) should all spur a change to the business plan. These internal changes mean your business plan needs to change to reflect the new change in direction — and to include the new team members in the planning process. Adjustments to suppliers or advancements in technology may also entail a review to best use newfound productivity and efficiency.
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When you need cash
The expectation remains for existing businesses: Lenders and investors want to see a current plan, not the plan you launched the business with. Updating the description, opportunities, risks and financial predictions with current information demonstrates control, and means your business looks less risky and more strategic. This can encourage investors and lenders to provide resources.
Even if you aren’t asking for a loan, falling short of financial projections should trigger a review of the strategy. You’ll need to understand the current market and customer sentiment, and then decide if you need to change your strategy or approach to meet those demands. Even issues like delayed payments could be an early indicator of issues with customer satisfaction or an issue in your policies.
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When business is underperforming
If your business is falling short on benchmarks, return to the business plan and consider reviving it. One key reason business may take a hit is disruption from a new or suddenly thriving competitor. Understanding if your marketing approach, customer service or governing objective should pivot when competition — or technology — disrupts your market equips you to proactively manage your business in a new direction.
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When business is overperforming
While unexpected high performance is also a cause for celebration, sudden success requires a revived business plan as well. You must take steps to ensure the existing business structure and staff can sustain the unexpected growth. Remember, you launched the business with careful planning, and getting ahead of the plan means you’re heading into uncharted territory.
Similarly, launching new markets, products or services can mean new revenue streams. Increased revenue is generally positive, but these new ventures will also require defined goals as well as strategies designed to meet those goals.
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When a new month or period begins
Even if no major triggers occur, regular review is crucial to keeping your plan and business up to date. You can set regular review periods, such as every month. This establishes an active, controlled approach to your business, and allows you to make slight modifications as needed instead of being forced to make sudden, more drastic adjustments in the face of issues. This iterative approach can be especially useful for new businesses adapting to initial and ongoing market feedback.
Prepare Your Business for Success With Strategic Planning and a Flexible Mindset
The reasons for a business plan are many, as are the reasons for updating or modifying a business plan. Being flexible and vigilant in reviewing and updating your business plan is crucial in the current environment of technological disruption and AI-driven business tech integration.
Don’t treat your business like a surprise vacation — understand your destination, your strategy to reach it, and the money and resources it will involve. You may need to switch destinations at the last minute or pick a different route to get there. The key is to prepare carefully and get the education, expertise and resources you need to adapt quickly to any challenges that arise.
Learn more about Florida Tech’s online MBA program.
