Picture this. You and your family are planning a cross country trip. You know you want to end up at a certain city, a certain place. But instead of taking the time to map out the trip you just get in the car and go. Sure, you know the general direction you need to go – east or west. And sure, you have some money to spend to get there. So you start. The first few hundred miles things are going pretty well. You are seeing some of the country, the sun is out, roads are smooth. All is well. But then you hit your first major city. You get stuck on some beltway of some place and somehow end up heading south. That’s not what you wanted. So you try to fix it, you take the next exit and start winding down some back road. Suddenly, that back road turns into a dirt road. You hit some major pot holes and there goes a tire. Now you’re stuck. No easy way out. Down a path you never expected to go and at a place you certainly did not want to be.
What’s the point of this story? If you had mapped out the trip, things would likely be different and you would find yourself on the beach on the other side of the country.
So what does this have to do with start-ups? Often times we get so excited once we get an idea and we can see this being the next million dollar idea or you see your independence and just want to hop in the car and go. So you incorporate, you get a bank account, and you start generating expenses. Next thing you know you get your first customer, then a few more. Things are moving along great, but all of the sudden one customer is unhappy and one complaint sends your reputation plummeting as a company. What do you do? How do you react?
The business plan, though many will argue it is a tedious, unnecessary process, is your road map. Like our first story, if they just took the time to think out their route, the trip would have ended different. The same goes for your business. Sure you may raise capital or get a bank loan without one, but the process of developing the plan will make you think about every little detail that goes into starting, growing and operating the company. That type of planning should not be overlooked. By writing the plan it will force you to think through all of the steps and it will give you an idea of how to get where you are going. Yes, the plan will change. It will change often. But when you take a wrong turn, it will help you because you will be prepared and will allow you to be proactive instead of reactive. There is a big difference between the two and we see it all of the time. Without a plan and the discipline to follow one, small companies run the risk of over-correcting an issue which leads to more over-corrections needing to be made. The plan will keep you on track and give you guidelines.
So what does a business plan look like? Check back for our next post.