Once upon a time, it was common practice for entrepreneurs to write a business plan before attempting to launch a business. These days though, a variety of shorter documents have become popularized, like the lean startup canvas, and some entrepreneurs choose to adopt these documents over a full-scale business plan.
Value proposition and business model canvases definitely have a place in a startup lifecycle, but they aren’t business plan replacements. Yes, even in 2019, going through a business planning process is a good idea – no matter what type of business you are launching.
If you’re wondering why your business needs a business plan, there are several reasons. In this post, we will explain why a plan is important and show you how to write a business plan that wins.
Investors Still May Request It
It’s true what you’ve heard – it’s a new day and many investors will never ask for your business plan, even when deciding to invest in you. Business plans can be long and extensive. Some investors are satisfied with a pitch deck that gives them the details quickly with little effort required.
However, it is important to never group all investors into the same behaviors. While one group may never request a business plan, another group may find it necessary. When seeking seed or pre-seed capital for your business, preparation is key.
Is it possible that you’ll be able to secure a deal without a business plan? Yes. Unfortunately, it’s usually when you are least prepared that an investor will request it.
The Process is Invaluable
The business planning process is usually the first time that an entrepreneur has the opportunity to evaluate their business across every area – from launch to exit and everything in between.
Businesses that go through the business planning process are statistically more successful. In a study of 2,900 entrepreneurs, 72% of those with a business plan secured capital, but only 36% of those without a plan were able to do so.
Even if no one requests your business plan, you will be asked many questions that pertain to the planning of your business. For example, investors will ask about your go-to-market strategy or maybe even your exit strategy. While someone launching a business may not think about something as far off as an exit, it is a factor that is considered when going through a business planning process.
Preparation is key, especially when it comes to knowing the fine details of your business. Even if no one reads your business plan document, the process itself is invaluable to learning about and validating your idea.
It’s Not Only for Raising Funds
Investors and banks aren’t the only parties that may request to see your plan. Business plans are beneficial in many situations during the early stages. A business plan may be necessary when securing:
- Early Team Members: Startups must often bring additional team members on board to manage capacity as they grow. In the early days though, finances are often limited and equity must be given instead of competitive salaries. In this situation, talented team members will often only come aboard if they have a strong belief that the business will succeed over the long-term. It’s likely that a potential candidate may request your business plan to learn more about the business and its strategic plan before accepting your employment proposal.
- Early Suppliers: For businesses that sell a product, securing the right suppliers is critical. Some suppliers refuse to work with a new business unless they can meet a minimum order or have a strong strategy in place to quickly increase their order size. These suppliers may request your plan to learn more about your business before deciding to strike a deal.
- Early Partners: In the beginning stages of a business, alignment and partnerships with other brands can lead to early brand awareness and growth. However, established companies are much slower to align with newer brands unless they believe it will benefit them either in the short term or the long term. These potential partners may request a business plan before signing a partnership agreement.
How To Write A Successful Business Plan
Writing a successful business plan doesn’t have to be an overwhelming experience. However, it is important to know that investors receive many plans, and for your plan to stand out – well, it must actually stand out. Check out this infographic from ThinkLions and learn how to write an above-average business plan that investors pay attention to.