A business plan is a document that should be written before the startup phase of any business idea. It’s normally a way for an entrepreneur to attract investors to their business.
Most online business ventures are of the solopreneur variety and don’t usually ask for investors, so they often skip the important business planning stage of start up. However, it is a big mistake.
Here are 10 important reasons you need a business plan for your online business.
1. Create a plan of action — At its core, a business plan is a plan of action that, when and if you get lost, you can look back at it to help clarify where you are, and where you’re going. The plan doesn’t always have to be followed to a “T”, but the essential components of the business plan can keep you focused and clear on the actions you need to take to get to where you want to go.
2. Clarify your intentions — If you were not sure why you are embarking on a specific business journey, the business plan will help clarify your intentions and answer the all important question: Why? Knowing your why is an important aspect of anything you do in life, including starting an online business.
3. Identify your target audience — Most people go into business with a product or service already thought out. But the truth is, it’s better to know who your target audience is, their needs, hopes, dreams, desires, and fears, and then create a product or service that solves one of their problems. So, if you’ve done it the other way, you’ll need to define your target audience, which will help you learn the best way to market your product or service.
4. Define your services/products — Once you get into the nitty-gritty of business planning, you’ll be able to better define your product or service more than if you don’t write the business plan. You will want to create a prototype, and perfect the product or service until you know how you’ll create it, how you’ll deliver it, and how you’ll collect the money. Additionally, this process will help you identify opportunities to up-sell.
5. Determine competition — Every business should take a look at their competition, not just at start up phase but throughout the life of their business. Knowing what they are doing, and how they’re doing it, can help you differentiate yourself enough to stand apart from them.
6. Circumvent mistakes — As you write out the processes from beginning to end, through the business cycle, you’ll see where mistakes can be made and you’ll eliminate the possibility of errors by creating processes that prevent them.
7. Describe procedures — Every business needs standard operating procedures. How will you accept money, how will you pay your bills? How will you deliver your product or service to the client. How will you identify clients? How will you communicate with clients? The list goes on.
8. Establish personnel needs — As you determine each aspect of your offerings and how they run through the business cycle, you will identify areas where you cannot deliver alone. You may need a bookkeeper, an accountant, contractors, a manufacturer, and so on. You’ll not only know what you need, but who you will use as you create the business plan.
9. Discover technology needs — As you go through the business cycle in your business plan you’ll also discover needs for technology such as hardware, and software. Perhaps you want to start a graphic design business. You may identify various software apps from Adobe or other software developers that you need. Along with that comes a price point, which will determine the start up costs of your business.
10. Illuminate your mission — The process of doing the business plan forces you to figure out what your mission is, how you’ll deliver it, and why you’re delivering it. By illuminating these important questions you answer the who, what, where, why and how of your entire business from the ground up.