The purpose of business planning is to prove or disprove your business case.
Scary as that might sound, it’s as simple as making sure your business will draw enough customers to pay enough money for your products or services to enable your business and you to survive and perhaps even thrive.
What’s proof to some may not be proof to others. While absolute proof is hard to come by, there are many ways to strengthen or weaken your business case. The stronger your case, the more confident you will be in your business idea. Your confidence will come about as a result of a number of things you do. The important thing is to use building blocks that make sense to you, and to those you may be trying to romance with your business plan.
Newbies tend to experience uncertainty at the beginning of any business venture. A business plan provides an opportunity for you to gain confidence in your ideas. In other words, prove it to yourself and you will be in a better position to convince others.
Here is a glimpse of how it works. Imagine you have $100,000 and I am trying to entice you to invest it in my hot new business idea; selling laptop computers to polar bears.
When I first mention my business idea, you might think I’m crazy and set your browser to block my emails.
If I back my claim up with letters of support from the Northern Polar Bear Association, you might be curious enough to want to know more.
If I show you written orders for 20 laptops, signed by furry bad-breathed polar bears, you might start returning my phone calls.
If I increase the number of orders to 100 and include a couple of long-term contracts with established retailers in polar bear country, you might take me more seriously. You might even Google me, my ancestors, polar bears (your misdirected search for “bare laptops”, proves to be nasty!).
If I provide you with credible financial projections that detail how you can earn a staggering return on your investment over the next 18 months, you might consider the case “proven” and lunge for your chequebook.
The business plan is an opportunity to build your business case, step by logical step. By the time you get through it you will either have proven your business case, or not. Prove it and you may be ready to go into business. If you can’t prove it, don’t give up your day job just yet.