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Chris LoCurto

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February 24, 2014

Why You Should Write A Business Plan

February 24, 2014 | By | 18 Comments">18 Comments

Last week, we kicked off a content series around starting a new business with the How To Fund A Business video. Many of you have asked about how to write a business plan so today we start with the WHY.

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While some businesses make it without a business plan, I’ve seen a TON of businesses close their doors because they never had a plan to begin with.

You’ve heard the old saying, “Few people plan to fail, but many fail to plan.” So have a plan!

For me, there are three main reasons to write a business plan. Ok, there’s a fourth, but you’ll see my response below.

Definition  Start by defining a few things:

  • Product or Service – What in the world is it that you’re planning on doing? You have to be able to completely define what the product or service is, what it does, how it’s used, etc. If the customer can’t understand it, they surely won’t buy it.
  • Customers – You would be shocked at the number of highly profitable corporations that have launched products that nobody wanted. Hello, New Coke circa 1985. Everyone has an idea that is their baby. The problem is, not everyone thinks it’s cute. Do a lot of market research to find out if people even want to purchase your baby…uhhh, product.
  • Competition – It’s not enough to have a great product idea, you have to know if anyone else had the great idea too. Is your idea going to catch fire more than what’s out there? If you run up against someone who already has a foothold, you might find your incredible idea struggling to get any attention. Anyone remember Betamax?

Viability – By definition, viability is having the ability to live and grow normally. Can the product or service you have grow because of demand, or will it just be a flash in the pan?

Way too many times I see people want to launch a product because of the “perfect storm” moment, only to realize by the time it gets to market, the storm has changed direction.

You have to be able to forecast your Product Life Cycle to the best of your ability. This can be both stunning, and comforting at the same time.

Startup costs – It doesn’t matter how great your product idea is if you have no clue how much it will cost to get it to a sellable model. It’s vital for you to think through every possible cost on the front side, before going into production. It’s hilarious how the standard of building a house is to give the customer a budget, and then go 30% over. Everyone in the construction community understands that but the customer.

I’ve coached a few entrepreneurs who started building their business before counting the cost, only to come to a screeching halt due to a lack of funds. It happens a lot in the restaurant world.

Financing  Oh heck no. I’m not going to give you financing as a reason why to write a business plan. If you have to borrow or get venture capital, then start your business plan with, “This will most likely cause me a great deal of pain, stress, pain, anxiety, and PAIN!”

So, those are just a few reasons WHY you need to write a business plan. Understanding these aspects in the beginning could be the difference between moving forward or not, as well as succeeding or not.

Question: How valuable is the WHY when starting a business?

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  • http://zechariahnewman.com/ Zechariah Newman

    Great post Chris. I just finished a post that will go up later on our personal why. It is amazing how our culture is so focused on what instead of the special sauce behind that very thing. Our why is everything in business and personally if you don’t have it we will all drift.

  • Chris Munson

    Wonderful points about the why of a business plan. The market research comment seems to me to be the most important point. I hope you add a blog post on market research as part of the series.

  • http://www.lilykreitinger.com/ Lily Kreitinger

    Lack of a plan leads to stress, pain and failure.

    • http://www.ChrisLoCurto.com Chris LoCurto

      and a loss of desire. :)

  • http://www.mattmcwilliams.com/ Matt McWilliams

    How valuable is the WHY when starting a business?

    More important than anything else.

    Without it, there is no point to starting. Nothing else will carry you through difficulties, economic downturns, employee problems, or anything else.

    • http://www.lilykreitinger.com/ Lily Kreitinger

      Yes! I love this, Matt. The why will keep you hustling when the going gets tough.

      • http://www.ChrisLoCurto.com Chris LoCurto

        ohhhhh…well said

      • http://www.mattmcwilliams.com/ Matt McWilliams

        When the going gets tough, the tough…remember their why.

      • http://www.mattmcwilliams.com/ Matt McWilliams

        pic.twitter.com/bFyUXoypBQ

        • http://www.lilykreitinger.com/ Lily Kreitinger

          Nice!!

    • Chandler Lyles

      Great point Matt. Finding your why is the key to waking up every morning. Check out Eric Thomas’ motivational video! http://www.youtube.com/watch?v=JmHhMnnrjjk

      • http://www.mattmcwilliams.com/ Matt McWilliams

        Funny Chandler…I didn’t even have to watch it because I’ve already memorized it. :)

        I love ET…literally have everything of his and I am wearing a BPBF bracelet right now. If you don’t know what BPBF is, just ask :)

        • http://www.lilykreitinger.com/ Lily Kreitinger

          Be Prepared By Friday ?

          • http://www.mattmcwilliams.com/ Matt McWilliams

            Be Phenomenal or Be Forgotten

            • http://www.lilykreitinger.com/ Lily Kreitinger

              I know. I Googled it. I knew you were dying to share :)

    • http://www.ChrisLoCurto.com Chris LoCurto

      Amen brother!!