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Yes Virginia, You Do Need A Business Plan

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-by Myron Gordon

Have you every wondered why some businesses seem to do better than others? It’s quite likely that the more successful one has a business plan. Have you ever wondered why when you are watching Christmas movies that Santa seems to visit families with fireplaces, stockings and cookies? Just like the successful business, it’s quite likely that Santa prefers families who properly plan. It’s a lot easier to be successful when you take the time to plan. Whether you are just starting out or have been in business for twenty years, it’s never too late to put together a business plan.

Don’t sit there and complain that your new competitors are undercutting you. Your business plan would have identified that this would happen. Competition is inevitable in the business world.

Your business plan should identify if you want to use the Wal-Mart model and be a low cost provider, or if you are going to charge higher prices but provide first class service. Your business plan will help to identify the appropriate strategy for your business. Your business decisions are based on your business plan and the chosen strategy that is identified in that plan. Thus, in the above mention example, you would focus your business on dealing only with customers who want first class service, and ignore those who are interested in getting the lowest price.

Your business plan can also be shared with others, such as potential investors, bankers, employees and co-owners. This allows them to see in black and white what your vision is. People can’t read your mind. They need to see in print what you see in your head. They also need to see your thought process and how you arrived at your decisions. Just because you say you’re going to sell one million widgets doesn’t mean they will believe you. You have to prove it.

On top of this you need to show that your financial projections are in order, especially your cash flow projections. Most start up business fail due to cash flow problems, not because there isn’t enough business. That is why those businesses that come in and under cut your prices don’t last very long. They get lots of business but due to the low pricing there cash flow quickly dries up.

Your business plan will also identify the strengths and weaknesses as a business. This will tell you where you should focus your business and what aspects of your business need to be strengthened. It will also identify which areas your business needs to pay more attention to or the areas where a competitor can take advantage. Ensuring the barn door is kept closed is essential to a successful operation.

Opportunities and threats are also identified through your business plan. Your business should always know which opportunities are going to produce the biggest “bang for the buck.” You don’t want to waste time trying to sell a product or service that will produce very little profit.

Conversely, you want to ensure that you guard against potential competitors or products that will threaten some of your market share. A business plan will help to identify where those external attacks are going to come from. In turn you will be better able to protect yourself against them. It’s a lot easier to defend yourself against that new competitor when you already have a plan of defense.

While your business plan won’t contain all the answers, it will give you a step up on the competition that “flies by the seat of their pants.” It also gives you a focus point by which you can use to steer your business.

Just remember, it’s easier for Santa to get in the house if you’ve already built the chimney. 


Myron Gordon owns TMSG Management Services Group, which provides management and financial services to growing businesses.


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