Business Plans Matter: How to Avoid Failure
A company’s management team faces many kinds of risks every day. Some are uncontrollable. If management fails to recognize and address critical risks that can lead to business failure, bad things can happen to good companies. When “new” technology wasn’t new enough, some corporations collapsed. Others failed because their co-founders disagreed. According to statistics, it’s difficult to create a business from scratch that’s successful.
Every project needs a business plan. The purpose of an exceptional business plan is to protect entrepreneurs from the pitfalls of “winging it”, to solidify an idea into something truly foundational, and to attract partners and investors.
Failure through Freehand
A business never succeeds without a specific plan; that would be disingenuous. It is possible that some were lucky enough to shoot from the hip and only bothered to take more careful aim when it became necessary to sustain their growth. Generally, these lucky few are most definitely few and far between. If you rely solely on pitch decks and charisma, you may be missing out on important business insights.
Often, the organizational structure falls by the wayside when we rush to turn ideas into reality. An idea can be exciting, but without understanding target demographics, a marketing strategy, financial projections, competitive differentiation, and an analysis of competitors and their movements, the idea could fall flat.
It hurts when you are told that a business or idea is doomed to fail. A sting like that is small compared to the sting of wasting time and money on a project that’s not likely to succeed or could have been improved. A business plan provides you with the perfect opportunity to take a close look at your idea and understand all its flaws, opportunities, risks, and advantages.
Prudence through planning
In order to communicate strategy with investors and partners, business plans are an invaluable resource. When you write down what you mean to say, you avoid miscommunication. In this way, you and your company are protected from easily avoidable problems down the road. Knowing how your business will operate and what strategy you’ll employ to proceed is just another way to give yourself an advantage.
It is almost as vital to talk through the competitive landscape into which your business might enter, to understand the dynamics and size of that industry, and to understand the history of the competition as it is to make the plan itself. These factors can all contribute to the positioning of your business. A plan of attack cannot be understood without knowing where you are. When business strategy meetings are conducted, “obvious” things often remain unsaid, leading to deep-seated misunderstandings later on. The creation of a business plan and communicating that strategy can help ensure that all stakeholders recognize the commitments that need to be made as the company moves forward.
Success through Storytelling
In the end, the ability to share your thoughts with others is perhaps the most valuable part of the business plan. This is an excellent method of proving to people that your idea has been well thought through and is sophisticated. Intelligent risk management is demanded by investors. Risks are not avoided altogether because they would miss out on opportunities, but they do expect a minimum level of commitment and understanding of the industry in which their money will be spent.
The business plan allows entrepreneurs to show others exactly where the project is headed by walking them beat by beat through the story they are telling. It must be internally coherent, logically consistent, and well-researched. It must also be pragmatic about the unknowns and inevitable scenarios. The combination of all these elements – including real pragmatism – can demonstrate to investors, banks, or even potential partners that your business strategy is well-thought-out and sound, and to compensate for any unjustified doubts they may have.
Ultimately, a business plan is needed in 99.9% of cases. This plan must be comprehensive and gripping. It should complement your pitch and tell your story. This is supported by the data we’ve seen.
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