2 Good Reasons And 1 Bad Reason To Write A Business Plan

2013-12-22 22:33

Many people write to me and ask for advice to help them write their business plan. Over time since I have created my Problemio business plan mobile apps, I have personally gotten over 1,000 such emails. And surprisingly, in over 95% of the time, the conversations goes almost exactly like this:

Me: Why are you looking to write a business plan? And how far along are you in starting your business?

Person asking for help: I have not started my business yet, and I am trying to write a business plan so I can give it to an investor so I can raise money to start.

And, of course, this is when I realize that this person is likely mistaken in a few assumptions about raising money and starting a business. They are writing their business plan for a not-so-correct reason for writing a business plan because most investors do not invest in a business plan. And I spend quite a bit of my time explaining that to different entrepreneurs. In fact, I get questions related to raising money before actually having started a business that I created a video to help address this issue.

http://youtu.be/QCNXa7iEFX4

(For more videos like this, please subscribe to my YouTube channel which has 150+ videos with business advice on business ideas, business planning, marketing and fundraising, and new videos daily.)

But don't be discouraged. There are at least two very solid reasons for creating a business plan.  One reason to write a business plan is when some person or organization that you want to work with explicitly asks for it. And a much more common reason to write a business plan is to get your ideas organized. And absolutely everyone who has a business idea should get their thoughts organized.

Here is a brief video that further elaborates on when it is a good idea to write a business plan:

http://youtu.be/0kYxzkx6JJI

Since most of the time, the best reason to write a business plan is that you work out a solid business model that will be the foundation for a successful business, the most essential parts of a business that must be organized and work well together in theory and in practice are:

1) What will the product or service be, and how it will benefit people.

2) How you will promote, market and sell that product.

3) The financial picture of how you produce and sell the product.

The three points above are the foundation and the base for your business model. And the business plan is essentially an expression of your business model. The term business model is widely used, and is commonly mis-used. So here is a video tutorial on what exactly is a business model.

http://youtu.be/dsUz6lfXCkE

And here is a video tutorial on what is a business plan and how to write one.

http://youtu.be/pTKvgsUrLGE

Many people who start a business typically know how to produce a product or how to provide a service that is within their expertise. And what they struggle with is how to promote that product and sell it in sufficient volume to earn enough money to get to their financial goals. To quickly help you understand marketing, here is a video that takes 3 very different approaches to explore and explain what exactly is marketing and some ideas for how you can approach it.

http://youtu.be/G7cEyoYfvKg

Once you get a sense for the marketing for your business, you are ready to focus on the finances for your business. The financial picture of your business is a bit more difficult to understand. Here is a simplified approach to the finances of your business.  You should make a list of all the expenses to start, the ongoing expenses after you start, and the revenue streams that will bring in revenue. That is a very simple way to create your cash flow statement which is the core of the financials of your business. Here is a video tutorial on what is a cash flow statement and why it is important.

http://youtu.be/MbmyaNymt5M

Keep in mind, since most of the time you write a business plan just to organize your ideas, and not to raise money, a good plan is one that has a strategy for you to get started. So if your plan has very high barriers to entry that are not too realistic for your particular case, try to plan around it to see whether you can start your business at a smaller scale and grow it into your ambitious plans over time. And conversely, a bad plan is one that makes it very difficult to actually get started. So don’t put too much pressure on yourself when writing your business plan. Just try to think about how to start a business you can easily start and begin promoting to get clients and make money.

For more business help, please subscribe to my YouTube channel. It is free and I post business videos regularly. And please check out my business plan blog where I give further business advice.

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