According to a recent article by Harvard Business Review, entrepreneurs who write startup business plans are more likely to succeed. It is crucially important to synchronise the writing of your business plan with other key startup activities.
A startup business plan is a good idea at the very start because it answers basic questions like “Where are we now?”, “Where do we want to get to?”, and “How are we going to get there?”. By detailing out how to orchestrate complex interdependencies such as customers, competitors, operations, logistics, marketing, and sales, writing a plan first appears to schedule out actions and strengthen the link between actions and performance for the new venture.
Planning does have value.
In a survey conducted by HBR, looking at more than 1,000 startups, separated into planners and non-planners, it was found that entrepreneurs who plan are more likely to create a viable new venture.
With this said, the real key to succeeding in business is being flexible and responsive to opportunities.
Entrepreneurs often have to pivot their business once it becomes clear that their original customer is not the right customer, or when it turns out that their product or service fits better in an alternate market.
Here are our 16 Reasons why you Need to Write a Startup Business Plan in 2021:
- To prove that you’re serious about your business. A formal startup business plan is necessary to show all interested parties — employees, investors, partners and yourself — that you are committed to building the business.
- To establish business milestones. The business plan should clearly lay out the long-term milestones that are most important to the success of your business. A milestone is something significant enough to come home and tell your spouse about (without boring him or her to death).
- To better understand your competition. Creating a startup business plan forces you to analyse the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages.
- To better understand your customer. Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to an effective startup business plan and to a successful business.
- To enunciate previously unstated assumptions. The process of actually writing a startup business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyse their validity.
- To document your revenue model. How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model.
- To determine your financial needs. Does your business need to raise capital? How much? One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for Raising Capital for your business and for effectively employing the capital.
- To attract investors. A formal business plan is a foundation for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/service? What are the financial projections? What is the company’s Exit Strategy?
- To reduce the risk of pursuing the wrong opportunity. The process of creating a startup business plan helps to minimise opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity versus other opportunities.
- To force you to research and really know your market. What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service? Creating a business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace.
- To attract employees and a management team. Attracting and retaining top-quality talent requires a business plan. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its strategic goals.
- To plot your course and focus your efforts. The business plan provides a roadmap from which to operate. It compels you to look for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones.
- To attract partners. Partners also want to see a business plan to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed explanation of your company.
- To judge the success of your business. A formal startup business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (and why you have or have not).
- To reposition your business to deal with changing conditions. For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new ideas and strategies.
- To uncover new opportunities. Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business.