Five Reasons Your
Home Business
Needs a Business Plan

by Ray Worthy Campbell

Do you have a business plan for your home business?

"Don't need one," I can hear some of you saying. "I don't want or need a bank loan or venture capital, so why bother? Besides, I have other, more urgent things to do."

Think again.

Every business, no matter how small, needs a business plan.

When I started my first business, the very first step I took was writing a twenty page business plan from scratch. The idea was to sketch out my thoughts in a coherent way so I could see whether they made sense, and to define what resources I thought I would need to put into the business.

That first plan got read by no one but me, my wife, some friends whose opinions I respected, and my first employees. The basic ideas laid out in it helped us grow the business to more than $1 million monthly in sales in less than 18 months.

Along the way, a revised version of that plan was shown to a banker, and helped secure a line of credit.

Still later, after we had enjoyed explosive sales growth, a much revised version made the rounds of venture capital firms, and helped us raise more than $10 million in venture capital.

But the first plan was for me, family, friendly advisors and employees. It made everything else possible. I made a lot of mistakes, but I would have made many, many more without a written plan to guide me.

Here are five reasons your very small home business should
have a plan:

* It focuses you on the tasks required for success. It is one thing
to have an idea. It is quite a different thing to have a plan. Writing out a plan forces you to focus on what you need to do to convert your idea into reality, and so multiplies the likelihood that you will focus on and achieve those tasks.

* It helps you to assess the real potential of the business. A lot
of potential businesses seem like great ideas until you think about them in detail. Once you think about them, though, you may realize that the market is too small, the competition too fierce, or the investment required too great. You want to figure that out on the front end, so you can move quickly to another, better business with all your energy and resources still available. You do not want to figure that out after spending a year plugging away at a business that a plan would have revealed was not likely to succeed.

* It provides a structure for making the hard choices about where
to spend time and money. You will not be able to pursue every marketing idea or business opportunity that comes along. You also cannot afford to run out of money or time halfway through getting the business up and running. Creating a plan helps you build a coherent list of priorities, which in turn will help you make the right choices about where to invest your time and money.

* It gives you a structured format for sharing your thoughts with others. People respond more analytically to a written plan. They can spot holes in your thinking or important unspoken assumptions more easily when dealing with a structured, written presentation. If and when you get to the stage of having employees or partners, the written plan also helps them understand your vision for the business -- and having them understand and pursue the same vision is absolutely, positively critical to your business. Last but not least, if and when you get to the stage that you need outside support from banks, government agencies, investors, vendors or landlords, your finely honed written plan will go a long way to persuading them of the worth of your enterprise.

* It shows to family and others that you are serious about this home business, and helps you in enlisting their support and cooperation. Let4s face it: sometimes the last people to take your business seriously are those closest to you. Having a written plan tells people that you take this business seriously and have made a commitment. Once family and friends realize that you take the business seriously, they are more likely to take it seriously as well, and more likely to cooperate and help.

So what is involved in writing a business plan? To be of value, it must be based on your thoughts and analysis, and not cut and pasted from a template or business plan software. What matters is not that it look good or have the standard boilerplate phrases, but that it provides a way for you and others to think through the issues surrounding your business.

Next week, we will go into more detail about what needs to be included in your business plan. For now, the takeaway point is this: start planning. It can be the foundation of your success.

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Ray Worthy Campbell's first online business reached $1 million monthly in sales in less than 18 months. His weekly business tips are available at http://www.Home-Business-Tips.net.

Copyright: Hard Knocks MBA, Inc., 2003