Laying a foundation for your business is necessary if you want to thrive as an entrepreneur. Roughly 20% of businesses fail in the first year. That number jumps to 50% by the fifth year.
What is the most essential piece of the foundation? The business plan. Too many entrepreneurs ignore the business plan because it’s too much work.
Making a business plan takes work, but it uncovers so much about the market that you can make strategic decisions about the business.
Should you write the business plan when you get the initial idea or should you wait until you’ve been open for business for a while?
Read on to learn when the best time is to write a business plan so you can lay a solid foundation for your business.
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When Is the Best Time to Write a Business Plan?
The best time to write a business plan is before you start your business. It makes the other steps in starting a business much easier.
The business plan helps you validate your idea. It requires that you investigate the competitive market and external forces that impact your business.
Let’s say that you’re about to jump into the real estate business. It seems like the perfect time because the real estate market is incredibly hot right now.
Making a business plan forces you to take a long-term approach to your business. You would learn that interest rates are going to rise in the next year.
The market will cool and there is a lot of economic uncertainty. These things have a dramatic impact on the real estate industry.
The business plan makes you aware of these potential risks. It allows you to develop strategies to navigate these issues instead of panicking and reacting to them. Panicking and reacting leads to bad decisions, which have negative consequences for your business.
Items to Address in Your Business Plan
There are a few things that you should have in your business plan. Come up with a good description of your business.
The clarity around who you serve, when, and how helps you communicate the business to investors, referral partners, and potential clients.
Don’t forget to explain why customers want to buy from your company as opposed to the alternatives.
Pricing is another issue to address in the business plan. It impacts the perception of your business and your positioning in the marketplace.
There’s a connection between perceived value and quality in pricing. If you undercut your customers to get more sales, customers will perceive the product and service as low-quality.
Laying a Foundation for Your New Business
You just learned why laying a foundation is so important when starting a business. You become aware of the potential issues and have a plan to address them.
The business plan helps you discover those risks and issues. It helps you clarify your services and who your customers are.
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