4 Reasons why you Need a Clear Business Plan in 2023
If you’re thinking about starting a business or side hustle — maybe you’ve thought of scribbling frantically on the back of a napkin, caught by a wave of random inspiration and drive whilst sipping your second coffee of the day.
That’s kind of my story — except I was in something that resembled an Oodie before Oodie’s existed (I was probably wearing something fluffy and warm from Korea that my grandma sent me to brave the Canberra winter). I was also sitting in bed, yes. Scribbling frantically in a lined notebook when I thought of my first business idea.
I contacted someone about my idea, and they thought it was great. They gave me a timeframe to get a team together and refine the idea. Apparently I needed a business plan. I had no idea what a business plan was at 22 years of age. But I remember Googling things, feeling inadequate and out of my depth but monumentally more excited and driven by the momentum of my idea.
So I started writing my first business plan, but never finished. I had a clear, vibrant idea of what I wanted the business to look like, and an even strong “why” behind the “what” — but I didn’t have a long term vision. My excitement fizzled after 2 years as I faced challenge after challenge. Things I wasn’t expecting. My resilience wasn’t yet built to a place that could push through and solve those challenges — I was lacking insight, foresight, leadership, experience and support.
Since then, I’ve learn that writing a business plan should be a priority. Not because the act of writing it is essential to starting a business — moreso, because of the clarity that a strong business plan can bring.
But first things first, what is a business plan?
In a nutshell, a business plan is a written document that outlines a company's goals, strategies, and action plans for achieving success. There are lots of different business plan templates, some that are shorter than others — but it’s important to note that business plans typically include an overview of the business, market analysis, target audience, marketing strategies, financial projections, and management structure.
Now let’s get into why it’s important to have a business plan when it comes to starting, running and scaling your business. Having a business plan is crucial for several reasons.
1) a clear business plan helps bring Clarity around your direction
Writing a strong business plan will help you define your business's goals and objectives. A business plan should answer the following questions (not in a specific order).
What will you name your business?
What do you want your business to look like?
Who do you need to make your dream a reality?
How big do you realistically want your business to grow?
What kind of legal structure will allow you to start up, and sustain that growth?
What kinds of products, services will you offer?
How do you know if people will actually exchange money for your services and products?
Who specifically will be the target audience of your business?
Where do they spend their time?
Who are your competitors in the market?
What kinds of challenges do you envision facing?
What are some growth opportunities? Etc.
A business plan should answer these important questions and define your goals and strategies. It’s not the end-all-be-all, but it should provide you with clear direction, a strong blueprint, and a roadmap for achieving them.
2) writing a detailed business plan can help you prepare for challenges
Strong business plans should include a SWOT analysis. A SWOT analysis is essentially a quadrant table that covers the business’s Strengths, Weaknesses, Opportunities and Threats. Being able to identify your competitors, challenges, and even potential unexpected situations that the economy may bring (i.e. A recession or a global pandemic) means that you won’t be completely surprised when those challenges do become a reality.
Being aware of the things that might become difficult and chaotic from the get go means that you can plan, strategise and pivot effectively when the going gets tough. Which it will. I promise.
Say, you’re wanting to open a bakery. But there are 2 other bakeries in the region that you’ve signed your commercial lease for.
The challenge here is that the other more established bakeries on the same street will have a loyal customer base who may not be willing to try a new croissant from yours. This is a big challenge, as it’s incredibly expensive to open and run a bakery due to the amount of outgoing costs there are to cover the rent, bills, staff and ingredients too.
Being aware of this challenge can help you be strategic and plan how you can make your bakery different and stand out from the other locals.
A SWOT analysis on your business plan should also help you identify the opportunities to take your product to market. What can you, and your business execute well? What are the things that can give you a unique, cutting-edge selling point? What will you build your brand around?
Perhaps you build a social media following by creating high quality content to convey your brand as a trendy, gluten free bakery with “Instagrammable” backdrops. Rather than wanting the locals to be your regular customers, you might want to target a whole different market and bring Millenials and Gen Z customers who are always on the lookout for the next trend. You might even get featured in magazines, blogs and find a whole new audience.
Being aware of your strengths, weaknesses, opportunities and threats can give you a grounded, realistic view of where you’re at, what kind of market you’re entering into, and not only help you become more resilient in the face of challenges, but also help you to innovate and create something fresh.
3) having strong FINANCIAL projections & budgets can be make or break when applying for funding
Numbers. Business is about numbers. Yes, it’s about dreams, customer service, breaking free from the 9-5, but it’s also about numbers, money, cashflow and balance sheets. These are the bedrock for business.
Without cash, you can’t invest in anything. Without revenue, you can’t invest in marketing. You can’t create a new product. You can’t hire staff. You can’t build a website and create effective systems. Without healthy cash flow, you can’t start, build and scale your business to grow bigger than you.
You need to have a clear projection of your numbers when writing a business plan. It doesn’t have to be perfect and to the tee — but you need to be aware of how much it will cost you to pay:
The bond for your commercial space
For subscriptions essential to running your business (E.g. website, accounting, design programs)
Your staff
Rent and (Both your home and your business)
Any renovations, fit outs or materials needed to start your business
Other questions that are really important to address are:
How much money are you starting with?
Are you self-funded?
Will you raise funds from family and friends?
Do you need to fork out a business loan?
Can you find investors who can help you take your business idea off the ground?
A lot of the time, starting and setting up a business that requires a physical space and materials can be incredibly expensive.
Hence why it’s extremely important to have a clear business plan. Not only do you need to know what you’re signing up for — but you need a grounded understanding of your numbers to when seeking funding from investors or applying for bank loans.
You need to demonstrate clear knowledge about your target market, marketing strategies, cash-flow management, organisational structure, amount of funding required, and how you much profit you are expecting to generate in 1, 3, 5 years.
Banks need to know that you’ll be profitable, and investors need to know that their investment will actually yield a return — not leave them disappointed.
If you take the time to build foundational strategies to reach big picture business goals, it’s not only favourable in investors and bank lenders eyes — it’s likely that you won’t be approved for funding without a clear business plan.
4) having a solid business plan can help you tangibly measure your progress
When you know where you want your business to go, and have a clear idea on how you want to get there — you can plan, take steps forward, and stop to reflect to check in.
Are you where you envisioned yourself to be since you set those goals? Is your business looking the way you planned for it to look at the start?
Business plans can serve as a tool for measuring your business’s progress. This can be based on your financial projections, tangible goals and organisational structure too.
It’s important to compare the goals you set yourself in the early days and reflect on whether you’ve met them, have made adjustments and pivoted since then — or are still working on reaching the point that you set out to. It’s important to celebrate progress, understand if change was needed, and continue to set bigger, brighter goals to hit in the days, years and months to come.
Business plans aren’t all that clinical. Trust me, this is coming from a creative.
Business plans can be inspiring as much as they are strategic and specific.
Taking the time to create a strong business plan will create your roadmap to building and scaling your business. A well-crafted business plan ultimately will help you, as the entrepreneur — to stay focused on the big-picture, strategise, pivot and solve challenges as they arise.
As you continue to refine your goals and continue revisit your business plan to track your progress over time — it will propel your trajectory towards long-term success. This is why you should write a clear business this year when starting your side hustle and business.
