There are several myths floating around the internet and around the business world surrounding starting a new business and the importance (or not) of the business plan. Whoever you speak to will give you different information. Some say a business plan is the difference between the life and death of a business, while others say it is not as important as most people think. Clearly the business experience is different for every entrepreneur. Every business is different and similarly, so is every business plan.
One of the myths of business start up or company formation involves the actual creation of the business plan. Some businessmen are under the impression that if they can find their own finance for their business then they don’t need a business plan. This sort of attitude should instantly remind you of the old proverb – “He who fails to plan, plans to fail.”
Planning For The Business Future
A business plan is not a “finance” plan (although finance will necessarily be part of it), but a plan for the future of your business. The important elements of the business will be contained within and in essence, a business plan is the business on paper before it actually exists in reality. Drawing up a plan allows an entrepreneur to set goals, establish the businesses identity and monitor success in the future. The business plan is a living entity and may be adjusted in years to come, when the new business owner learns about the business and the industry he or she is in. Business plans will naturally be overly optimistic or pessimistic – depending on the planner, but they are also an important business tool.
“I’m using my own money, I don’t need a business plan”
If you’re lucky enough to have sufficient money to start your own business and fund every asset without any external support then you’re likely to want to treat the business carefully and get the most out of it. With a good plan, you will know where you are taking the business, where you hope to be in 5 years, what your turnover should be in the first year and things of that nature. Without a business plan you will be going into business blind. With so many businesses failing in the first few years, it’s a big risk to take with your own money.
Using your own money, you will want to think about limiting you potential liability in an effort to protect your finances. Forming a limited company is quite often the most sensible choice for people looking to start a new business under their own steam, not least because of the financial protection offered. Take a look at our article on the advantages of a limited company for more reasons why company formation is the best option for most people.
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