Starting a Business? Preparing a Business Plan is Essential For Success
Time and again I speak with business people, clients or otherwise, who started their businesses without creating a business plan. This is easy to understand because creating a thorough business plan that covers all of the essential topics is time-consuming. It is also frightening because it forces the prospective business owner to face issues related to starting the business that the person may not be ready to face, like, for example, the nature of the competition and what it is that the person is going to offer that competitors do not already. Even so, preparing a business plan is essential to the success of a new business. Set out below is a list of a few of the reasons why creating a business plan is important.
As already mentioned, it forces the prospective business owner to look at the business on paper and to face harsh realities about getting the business up and running on paper before actually getting started with creating the business itself. This process can be defeating, frustrating, and eye-opening because it may call into question the viability of the core business concept itself. But isn’t it essential to know whether your business can even work before spending time and financial resources on finding out?
It helps the prospective business owner to identify the amount of capital needed to invest in getting the business started and to keep it running for the long term.
It helps the prospective business owner to identify the sources of financing if the prospective business owner does not already have the necessary capital on hand.
It helps the prospective business owner to identify the appropriate legal structure for their type of business.
It helps the prospective business owner to identify the legal context within which the business will operate, and will help the prospective business owner to become familiar with the laws that will govern their type of business. No business owner wants to be surprised that they are violating laws that they did not even know existed.
It helps the prospective business owner to identify marketing costs and challenges, including the direct and indirect competition and how to effectively differentiate the business.
It helps the prospective business owner to identify the proper location: whether the business should be online only, or whether the business should have an online and a physical presence.
It helps the prospective business owner to identify the ideal physical location and the costs related to acquiring the location and preparing it for legal occupation (legal occupation is required to obtain most business licenses in NSW and often involves resolving issues with the property with the local Council) by the business.
It helps the prospective business owner to identify their employer obligations, which are essential to avoiding issues with Fair Trading NSW, and the relevant taxing authorities, among others.
It helps the prospective business owner to identify their tax obligations, whether in relation to the business entity, or to the payment of salaries or the like to workers.
And, although each of the items in this list is essential, perhaps the most important reason to write a business plan is to understand the licensing obligations associated with ensuring that the business will look and operate the way that the prospective business owner wants it to look and operate for the long term. More specifically, while it is relatively easy to identify that the business may require a license from the Liquor and Gaming NSW to operate legally in Sydney, or anywhere in NSW, it may be less obvious without writing a business plan that the business owner may also want a liquor license for the business. Obtaining a liquor license in NSW particularly in Sydney, can be very challenging. Not only do the persons who oversee the State Liquor Authority regularly change, causing internal policies to change, but preparing a liquor license application requires gathering a substantial amount of information. Another example involving the unanticipated need for a license might involve a business that offers instruction/education to customers or clients, and the instruction/education itself implicates the need for the business or an owner to have a license to share the particular information. Simply put, deciding that a liquor (or any other) license may be essential to the success of the business after the business is up and operating is not a good idea. Not only does it create a great deal of unnecessary stress for the business owner, but it also can create a stressful relationship with any person hired to assist with obtaining the license.
In short, a person who plans to succeed must prepare a business plan and should only spend nominal sums on testing and researching the business idea before going ‘all in’.