The Top 5 Reasons You Need a Business Plan

Be Afraid – If You Don’t Have a Plan

It should be a highly motivating fact. According to the Small Business Administration, about 30% of businesses fail within two years of opening up. About 50% fail with five years of opening. But here’s the really spine-tingling part: 66% or about 2 out of 3 business fail within 10 years. So, what’s the difference between these companies and those what have been around for decades? There are likely to be several reasons, but a key root cause behind failure is not having a current business plan.

Go Beyond a Wish

Lot’s of companies have a business plan, but they’ve left off to one corner of the virtual office to collect dust. Or, the business plan is someone’s two or three ideas jotted own on a piece of paper, but no action plan behind.

“A goal without a plan is just wish.” – Antoine de Saint-Exupery

Antoine de Saint-Exupery lived in the early 20th century. A French writer, poet, aristocrat, journalist and pioneering aviator. The above quote is one of his most famous, but gets to the heart of why a business plan is so important.

Successful companies have these steps integrated into their daily routines. The best companies break it down this way:

  • Annual Goals – by quarter

  • Quarterly Goals -by month

  • Monthly Goals – by week

  • Weekly Goals – by Day

  • Daily Goals – I think you get the idea.

The point is is this: in order to reach a goal, you’ve got to break it down into actionable steps. The larger and more aggressive the goal, the more this discipline becomes paramount. The more discretely you’ll need to break it down.

You need a business plan because doing so will make you think of what it will take to break down your journey into a set of doable steps.

Reason One – to break it down.

Common Purpose

Even if you have the best plan in the world, now you have to communicate it to your team. Not just your executive team, but the entire company. Why is this helpful? Because it grounds your entire staff in the purpose of what you are in business. It also gives them a clear idea of what the company goals are for the year. If don’t properly, it helps everyone up and down the the company ladder to do their jobs better. Why? Because they’ll now the company goals and that can go a long way in helping them to do their day-to-day jobs better. You may have heard of the management philosophy called Open Book Management. Its premise is to provide all employees with important financial information? Why? so that they can make good trade-off decisions without having to run everything up and down the flagpole.

Reason Two – To drive common purpose.

Know Where You Are, Know Where You Are Going.

Here’s a term you may have heard from time to time: “Inspect what you expect.” If you need to hit a run rate of $1,000,000 a month (expect), then you need to pay close attention to how much revenue you’re bringing in day-to-day (inspect). It’s much easier to make changes, corrections, improvements at the start of the month, than to hand your company’s monthly numbers on a home run hope on day 29. A good business plan lays out targets, both revenue, cost, and margin, for your entire operation. With a goal in mind, now it becomes a challenge, and a lot of fun, to track your progress. Keeping the exercise “open book” allows the accountability for performance to spread across the organization. Plus, keeping a record of the projected performance, against actual, allows you to better understand your strengths, weaknesses, and opportunities to grow.

Reason Three – to drive performance.

Getting Serious

Successful businesses are an incredible exercise in trust. Trust between your company and customer. Between your customer and their customer. Between your company and its employees. Between your suppliers and you. Sooner or later, you may need outside help, say a loan or other investors to partner in your operation. Inevitably, the’ll want to know you’re serious. This means your company will have to show them you’re serious about running your business, seriously, like the professional that you are. You’ll need to show them that you’re serious about running your own business. That you care about making money. That you care about satisfying customers. That you care about paying your vendors. That you care about paying your employees. That you care about doing all the above in a way that’s profitable. If you show up at the bank needing a loan, what will the loan officer ask you right from the start? “Do you have a business plan?” That will be followed closely by, “Can we see your financials.”

Reason Four – to prove you are serious about making money.


“In preparing for battle, I have always found that plans are useless, but planning is indispensable.” – Dwight D. Eisenhower

Its not so much getting the perfect plan, as it is the discipline of making a plan. Having gone through this cycle of planning as both an operational manager and as a consultant, it can often seem painful, a waste of time, with a whole lot of not-a-lot-of-value-added. Literally, walking through every aspect of the business. Not once, not twice, but until your are blue in the face sick of having done so. Working through number for a good scenario, a bad scenario, a middle of the road scenario. Or course, the scenario you actually live through (i.e. the real-life one), is one you never came close to imagining. But that’s the point. You won’t know what is going to happen, but you will be prepared. Why? Because you’ll know every aspect of your business inside and out. Plus, all the scenario planning means you’ll have a good working knowledge of your business – at your fingertips – not locked away in some folder on a hard drive.

If you think the plan has to be perfect. Think again.

“A good plan today is better than a perfect plan tomorrow.” – George S. Patton

A client and her rather large financial services company always likes to say, “progress over perfection.” I like this way of looking at the world. Have a plan, but don’t get stuck creating the absolute, end all, be all, plan. Build the plan to a level where you can actually take action. Consider the risks and do some contingency planning just in case things go south. But, when you’ve got enough down on paper to go, then get the green lights and learn. Actually putting your plan into place will provide excellent feedback and an opportunity to learn. Take a page from there proverbial Nike playbook and “Just Do It.”

Reason Five – to be ready.

So, what are you waiting for? December 31st is looming just around the corner – get planning.

You can get started with our Cyber-week special – The Discover Initial Assessment. Highlight the areas to focus on for 2020.

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Here’s a toast to 2020!

Ernie Arboles


Margin Enhancement Solutions