Why Should You Have A Written Business Plan?

Probably one of the closest statements to absolute truth is "Fail to Plan and You Plan to Fail". I have never meet a business owner that didn't have a plan of some type, however there is a wide difference on how good their plans were. Failure to spend an adequate amount of time and money to produce a good plan is probably the biggest cause of business failure.

Why is a written business plan almost a universal requirement for lenders or investors? The answer is that experience has shown that businesses with a written plan are more likely to succeed than ones with a plan in the owner's head. Putting your ideas on paper require that you address all the basics such as your assumptions and risks, goals and objectives. It compels you to consider cash flow as well as profitability and helps you to formulate policies such as customer terms and employee benefits. A well written plan significantly reduces the chance of failure due to the dumb assumption that all your customers will pay timely and that all your vendors will extend you credit.

Having a well written plan produces many intangible benefits to include:

Faster decision making - you already know your projected cash flow so you can jump on that quick opportunity if the dollar amount fits.

Focus - Plans stored in your head are easily changed resulting in a new direction every time you see or read something new. A written plan can keep you focused on the original goal.

Coordination - Providing your employees with your plan helps them to keep focused on your real goals rather than what they perceive that your goals might be.

Accountability - Assigning parts of the plan to specific managers gives you a tool to determine their value to the organization.

Fewer dumb mistakes - There has been more than one business that even at full production could not produce a profit. This is a classic error that any basic business plan would have pointed out.

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