Here’s a scary thought: if you have a small business but don’t have a business plan, you may be taking unnecessary risks and missing big opportunities.

Writing a business plan may not sound very exciting, but it can make a big difference. A business plan captures your best thinking and documents your ideas and hopes for your business. So, when you get wrapped up in the day-to-day, there’s something to guide your decisions, remind you why you got into the business in the first place, and how you can strengthen and grow it.

Think of your business plan as a roadmap to an important destination. It may be tempting to try to get there by following your nose. But you’re more likely to get there by charting your course.

A plan is important because of the impact it can have on your business.

Companies with business plans (yes, even one-person companies) are likely to grow faster, have stronger brand recognition, and be better positioned for the future than those without. Business plans help you create the right products, develop robust marketing strategies, and anticipate problems.^[1]

The most important reason to write a business plan is it can help fuel both short- and long-term success. Data from the U.S. Bureau of Labor Statistics shows that 20% of new businesses fail in their first two years, and only 25% will make it past 15 years.^[2]

• A 2017 Harvard Business Review article found, “Entrepreneurs who write formal plans are 16% more likely to achieve success than the otherwise identical entrepreneurs.”^[3]
• Data from the Journal of Management Studies suggest businesses with plans grow 30% faster than those without.^[4]
• That same study suggests business plans that spell out a business’s value proposition and customer appeal grow even more quickly.

So yes, business plans matter.

Business plans can take several forms, from long and detailed to short and high-level. But most cover these basics, which are critical when seeking loans and grants or effectively managing a company.

1. Company Description

What does the company do? What makes your company different, and why does that difference matter to your target customers?

2. Company Structure

How is your company legally structured? Is it a sole proprietorship, an LLC, or an S Corporation? Do you have employees or plan to have them? Do you plan to have partners for development, marketing, and distribution? Learn more about company structure by reading “The ABCs of LLCs” or watching this Small Business Basics video.

3. Product

What products or services does the company sell, and what makes them unique and attractive to potential customers? How are the company’s products priced?

4. Growth Potential

How big is the opportunity to make money? Who are your target customers? Who are your competitors, and how will you position your company against them?

5. Marketing

How will you reach and stay in touch with potential customers? Advertising? Social media? Marketing partnerships? Where will customers buy what you sell, and how can you ensure they have a good experience? Check out this page for more small business marketing resources.

6.  Financial Projections

How much money do you need to start or expand your company? What are your revenue and profit projections over the next one to three years? You can learn more about funding resources for your company here.

7. Timeline for Achieving Business Goals

What are your marketing, operations and financial goals over time?  For more information on how to set goals for your business, read How To Write Goals to Help Your Small Business Succeed.

Fortunately, developing a plan for your business doesn’t have to be complicated or take a lot of time.

First, consider how you will use your plan. Is it for you and your partners? Or, will it be part of a pitch for financing from a lender or investor? Obviously, those audiences will want different levels of financial detail, so keep that in mind as you take the next steps.

Business plans really prove their value when things change. The idea isn’t to maintain your plan, it’s to use your plan to help you respond to changes and make course corrections.

Your business plan identifies the relationships between the market and your business. As a result, your plan shows what the market lacks and how you fill that void. It describes what customers want and how your products serve them. It documents how you’re different from your competitors.

These are like gears that all mesh with one another. So, when one thing changes, your plan shows what you need to do to keep the machine running smoothly.

Does the arrival of a new competitor mean you should modify your product? Can you increase prices to cover your rising costs without alienating customers? Plug the new data into your business plan to help you see how it affects every aspect of your business. Then you can react as necessary.

Small businesspeople are notoriously busy, so it can often feel like you need to keep moving forward just to stay afloat. In fact, it’s possible to be so busy that you don’t even notice small changes in the market or in your customers’ behavior.

Make time to spend a few minutes reviewing your business plan every month. Also, think about your plan anytime something important changes. Even internal changes, such as landing a big new account or losing a key employee should trigger a look at the plan.

Finally, give your plan a full, detailed review once a year. A regular check will keep you thinking about what’s happening in the market. That, in turn, will save you time, money, and headaches in the future.

That wasn’t so bad, was it? Now you are ready to create a plan for your small business and to start enjoying the growth, performance, and comfort that come with it.

Looking for a checklist to help you set up your business? Check out (link to Strauss checklist article).

For more tips on starting and running your small business, visit the Index by Pinger Small Business Resource Center.