Why You Need a Business Plan

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Business-1297332Over the years, I’ve seen how business planning can be the secret to success for both new companies and rapidly growing companies.  I’ve seen how the best companies understand planning and regularly develop and manage their plans.  Good companies plan

Planning includes a major paradox:  The plan is useless, but planning is essential.  That’s a quote from former U.S. President Dwight Eisenhower, who had reason to know a lot about planning.  He led the Allied forces to victory in Europe during the Second World War. 

You already know the obvious reasons for creating a business plan, but there are many other good reasons that may not be as apparent.  Just to change things up a bit, let’s take a look at a slightly longer list of the most important reasons every business needs a business plan. 

  1. Grow your existing business.  Develop a strategy and allocate resources according to your priorities and goals.
  2. Create a new business.
  3. Set specific objectives for managers.  Good management requires setting specific objectives and then following up.  How can you manage effectively without a plan?  How do you know what’s supposed to happen?
  4. Deal with displacement.  Displacement is probably the most important practical concept that is ignored by business owners.  It goes like this:  “Whatever you do rules out something else you don’t do.”
  5. Share and explain business objectives with your management team, employees, and new hires.
  6. Share your strategy, priorities, and specific action points with your spouse and children.
  7. Hire new people.  How will new people help your business grow and prosper? What exactly are they supposed to be doing?  The rationale for hiring should be in your business plan.
  8. Decide whether or not to rent new space.  Rent is a new obligation, usually a fixed cost.  Do your growth prospects and plans justify taking on this additional expense?
  9. Back up a business loan application.
  10. Develop new business alliances.  Use your plan to set targets for new alliances, and use selected portions of your plan to communicate with partners.
  11. Decide whether you need new assets, how many, and whether to buy or lease them.