Why business plans are important to small businesses

Set your goals for 2019 with a small business plan

Why do you need a small business plan?
2019 is right around the corner. Now is a good time to evaluate the current state of your business and what goals you would like to achieve. Reviewing your business plan, or writing a new one, can be an effective method of evaluation.

Many small business owners operate their businesses for years without a formal business plan. But business plans have many practical uses, even if you’re currently satisfied with your business. A business plan can help you refine your mission and define your objectives, and create a better strategy for reaching those objectives. Detailed business plans are also important if you are taking on a new partner, or reaching out to lenders and investors for capital, or seeking new growth.

When should you write a small business plan?
If your small business has been in operation for years, and you haven’t written a business plan yet, you may want to write one right away. But if you’re just starting out, it may not be advisable to develop one immediately. According to the Harvard Business Review, writing one six to 12 months after opening can be more favorable. For the first few months your business is in operation, you are starting to talk with customers and starting to bring your product or service to market. After that experience, things may look a lot different to you, and that can help shape a better business plan.

Resources that could help you write your plan
The Small Business Administration (SBA) offers extensive resources for small business owners, including a guide for writing business plans as well as sample templates. The SBA also has a tool that you can use to write a small business plan online. After the plan is completed, the tool will connect you to other small business resources. 

BPlans.com offers a wealth of resources for small business owners, particularly those just starting out. Among their resources are links to over 500 sample small business plans, organized by industry category. They also offer proprietary business-plan-writing software. 

A simple and practical one-page business plan
Writing a one-page business plan may be sufficient for your small business, particularly if it is a sole proprietorship. The process doesn’t have to be time-consuming, and will give you a solid overview in a format that is easy to adjust. Consider the following questions: 

  • What is your vision for the business?
  • What needs are you fulfilling with your product or your service?
  • Who are your competitors? How will you differentiate yourself?
  • What is your pricing structure? Will your pricing be enough to cover your expenses?
  • How do you plan to market your business?
  • What are your objectives for the next year? How are you going to take action to reach these objectives within the anticipated time frame? 

Sometimes, a one-page plan may not be enough
If your business is a partnership, consider a more extensive business plan. The expanded plan will detail the responsibilities of each partner, how disputes will be resolved, allocation of profits, losses and draws, how partners are reimbursed, and how partners are added or withdrawn. You should write it early on to help shape the agreement between the partners.

If you are seeking a loan or funding from a bank or an investor, they may want information about your industry background and the niche your business fills. But they will almost certainly ask for a detailed description of how you'll use your funds and your future strategic financial plans. They will ask to see your expenses and future financial projections. Projections may include income statements, balance sheets, and cash flow statements for the last three to five years, and forecasted versions of those items for the next five years. 

Be ready to adapt to new challenges and opportunities
When unexpected challenges or opportunities arise, you may have to stray from your plan. Business success is often determined by how you can adapt to changes while staying true to your vision. It is commonly advised to update your small business plan at least once a year. Don’t be afraid to make adjustments to the plan over time. The more refined it becomes, the better it will help guide your decision making.