Why you need a business plan.

I love the Wall Street Journal. I read it online everyday and invariably find something to Tweet about or include on my blog. When I saw the article, “Why You Need a Business Plan,” in the small business section, I knew I had to write about it. It simply provided a great framework for why a business owner needs a business plan:

1. It forces you to identify with your (and your company’s) strengths and weaknesses.
2. It helps you figure out how much money you’ll need.
3. It gives you clear direction, which can help eliminate stress.
4. It will serve as a resume when you seek lenders, investors, or partners. (Also, here’s a great article detailing what you should know about raising money for your business.)
5. It makes you evaluate the market for your product or service and size up the competition.

This makes sense. And as baby boomers are beginning to hand down their businesses to a younger crowd – this transition also creates the need for a flexible or completely different business plan. The WSJ also posted an article about franchisers having more confidence in young entrepreneurs than who they may traditionally have sought; older more seasoned managers who have built up lots of savings to plow into the venture. So when do you need to have a business plan in place and how flexible can it be, given the potential transitions of leadership throughout a business’ life cycle?

Sure enough, the U.S. Small Business Administration has a guide to writing a business plan with several articles surrounding the subject – including tools and articles to help get your entrepreneurial ideas off the ground. Entrepreneur also details how to create a business plan and how to get help with your plan. And the state of Washington even offers a guide to planning a business in Washington. Business owners are entrepreneurs who know when to obtain help when they need it right? There’s no point wallowing in a hole all by yourself when there are resources to help you move between the stages of your business life cycle.

As far as timing goes, it really is up to you. A business plan can be made for any activity a part of your business. From monitoring your company’s progress to hiring and training employees, your business plan can be all encompassing or tailored to a specific need. You define why you need a business plan and when. It’s that simple.

And with regard to planning for transitions in leadership? This is a whole new ball-game requiring yet another type of business plan. Here are a few business transition plan FAQs to consider. But unless you have been through a merger, acquisition or divestiture, transition planning and execution are unlike anything you’ve ever done before. (Which probably highlights the need for a different blog post.) In the mean time, you can read the highlights of The Equinox Law Group’s recent seminar on preparing your business for sale. From this seminar, their blog includes the following articles:

• Preparing Your Business for Sale.
• Top Issues for Business Buyers.
• Three Common Pitfalls in Business Sale Transactions.
• Purchase and Sale: It’s Never as Basic as it Looks.

In whole, a business plan can be all consuming and affect every activity a part of your business. It’s always good to know what you’re in for before taking the final plunge. If anything, a business plan should reassure you of your entrepreneurial dream and solidify steps that ensure success. Write a plan that provides structure, but also allows a bit of flexibility. And also realize that a business plan can be generated at any time for any reason related to your business operations. It’s up to you, enjoy the ride.

Out of curiosity, I found the state of Oregon’s business plan for 2009 – check it out.

Photo courtesy of 4Entrepreneur.