Author: Bud Gayhart, University of Wisconsin-Whitewater
Statistics from the Small Business Administration indicate that a business with a plan is 40% more likely to survive than a business without a plan, yet 60% of small businesses do not have a written business plan. Even those with a plan may need to update it to stay ahead of the competition.
As an advisor, I have had many business owners ask me, “Why do I need a business plan?” They resist writing a business plan because they see the process as time consuming and unnecessary. Some have told me, “My business is doing fine; I don’t need a business plan.” When things are going well, it is easy to ignore the need for a business plan, but not having a plan limits your ability to grow your business and leaves you vulnerable to unexpected challenges.
I always recommend that business owners include a SWOT analysis as part of a business plan. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are internal to your business, while Opportunities and Threats are external. By identifying your strengths and weaknesses, you discover any areas in which you need to gain expertise. You may be able to gain that expertise through an advisor, or you may find that you need to hire someone with strengths that you lack. While considering opportunities and threats, evaluate the marketplace, seeking a niche where your business can dominate the landscape or at least face fewer competitors. Always focus on what makes your business unique, what differentiates it from competing businesses. Know your differentiation model and emphasize it in your marketing plan.
The process of creating a business plan forces you to take a closer look at your business. This scrutiny enables you to identify and describe your business’s marketing strategy, financial status, key competitors, and human resources structure. A solid research-based marketing strategy should detail the tools you will use to reach potential customers. Documenting your financial status includes identifying sources of funds. Business lenders require owners seeking financing to submit a business plan with financial projections going forward a minimum of three years. This plan must include an income statement, a balance sheet, a statement of cash flows, a break even analysis, ratios, sales forecasts, and assumptions. Describing the human resources of the company includes identifying the duties and responsibilities of each position.
Considering all of these factors can seem overwhelming, but it doesn’t need to be. There are many resources that can help you develop a business plan that is accurate and thorough, a plan that will help you become one of the small businesses that succeed. For help on writing a business plan, please search the BizStarts service provider list.
This article was written by Bud Gayhart Director of the Center for Innovation & Business Development at the University of Wisconsin-Whitewater.