So what’s the deal with business plans? Are they actually useful or are they just formal documents needed to satisfy loan or investor requirements?

I’ll start of by saying that a business plan does not guarantee you success. I’ll go even further by saying that if you don’t write a business plan your business can still succeed. Okay, so why invest so much time and effort into writing a comprehensive business plan? Well,  simply put, chances are that you’re better prepared with a professionally written business plan than without one. Here’s an analogy that might put things in perspective. A trainer cannot guarantee an Olympic athlete a gold medal. An athlete can even win gold without the help of a professional trainer. But, I think its fair to say that an athlete’s probability of succeeding are higher with a professional trainer than without one. Why? Chances are that the athlete is better prepared with the help of a trainer.

So what does a business plan entail?  What is it actually supposed to do? Well, for starters, a good business plan should serve as a blueprint for every aspect of your business. It should guide you with your business and help you establish targets, goals and objectives that otherwise might not be thought out carefully. Business plans reduce the time spent making decisions. What are your monthly cash-flow requirements? What price mark-up is needed to earn a sufficient profit?  What will you do if your competitors lower prices? These are the types of things you need to be prepared for so you can knowledgably make decisions for your business. Business plans should help improve communication between all members of the business by creating a common sense of purpose for the people involved. It should get you thinking about strategy and how you can succeed when others don’t.

The majority of businesses fail in its first 5 years so starting a business isn’t easy. But knowing this, why wouldn’t you take the time and effort to write a comprehensive business plan to better prepare yourself? Why just “wing it” when a business plan can help guide you in the right direction and prepare you to face business obstacles.

And to those who still maintain that business plans are useless; you need to understand this. Most successful entrepreneurs go through a process in which they uncover key questions about their business. So whether or not they actually write-out a formal business plan, these entrepreneurs essentially go through a thought process that prepares them the same as a business plan would. The difference is that most people don’t have the experience or knowledge to do this on their own, so a business plan can be an important document to help guide them in the right direction.

Planning and preparing can be helpful for almost anything you do in life.  Whether you’re training for a sports event, studying for an exam, or managing a company project,  you have a higher chance of succeeding and reaching your goals if you have a strategic plan of attack. A business is a major investment, so be smart and write that business plan. It might be the best business decision you ever make.