Some centuries ago, when people wanted to start a business, they just had to have an idea and start to execute it, in other words going out and sell. Today it is very difficult to think in having an idea and go out and sell before a structuring and planning phase. This is the reason why entrepreneurs use Business Plans in order to organize their business.
However I have been in many discussions about how good are business plans, because we may write whatever we want in a paper and create wonderful stories but when we execute them, all of this falls and the business plan is just a reflection of a fantasy the entrepreneur dreams.
Even though I believe this is a valid discussion, I have learned over the years as an entrepreneur that we might create these wonderful and unreal worlds on business plans, but if we are sincere and realistic with the tool we might take advantages of its benefits.
Why using business plans?
As I wrote before, this tool is highly discussed, but if we use it in a correct way it can help us to structure our business in an realistic manner – without denying that when we execute we might find many differences-. Furthermore today it is a tool we cannot leave aside because it will help us not just to define our business, but also with other elements such as:
- Detecting mistakes in our model before we execute it
- Define the project phases and its objectives
- Identify opportunities
- Foresee possible difficulties we might have to face
- Find investors
- Find partners
Define various scenarios
The biggest problem we find when we are constructing a business plan is that even though it is easy to define the expenses our business will have, because the same market show us the prices, it is not easy to know the incomes. Calculating the price in which we are going to sell our good it is not difficult, but it is knowing the sales volume. This is the reason why a good practice is to define three scenarios: the optimist, the neutral and the pessimist. When we define these scenarios, we prepare for different realities and we will know how to react when difficulties are presented. In this way, the business plan is going to be more than a paper and it will help us to prepare for different results.
Imagen tomada de Flickr.com