By Sahara A.Sheikh
Just like necessity is the mother of invention, a business plan is the mother of successful entrepreneurs. And we all know the importance of a mother in a society, right?
Most of us have at one time started a business without having the most important document: a business plan. To be a successful entrepreneur, this is fundamental. And in the spirit of entrepreneurship, take a piece of paper, pen, and get your coffee mug ready because I am about to tell you why you should have a business plan.
For starters, before we even delve into the importance of a business plan, let me paint a picture of what our innate human nature has once thought while adulating- one of the hardest things to do in life. Sigh! Take me back to childhood so that I don’t have to worry about hustling and bustling.
Back to our painting. Imagine owning a multimillion-dollar company, seated in a luxurious mahogany tabled office with views facing the ocean, the aroma of arabica coffee hitting your nose while you call your manager to get a briefing of the day. The days brief: your company hit another milestone and is the top leading in the world. Astounding!
If it were only that easy! Well, guess what? It is possible. Napoleon Hill once said: whatever the mind of a man can conceive and believe, it can achieve. So, whatever you set your mind to, you can do it!
In order for a business to thrive, one needs to ensure that whatever business they would like to start must be viable. Thus comes the first reason to have a business plan: viability. In order to conceptualize the grandeur image that we have of our businesses, we have to look at what the market out there is offering. The question that we need to ask ourselves is how we make this passion of ours turn into a golden entrepreneurship opportunity.
Target client
Through writing a business plan, you should be able to highlight the area of needs such as: your competitors, the gap in the market, and your target client. What do I need to do that other similar businesses are not doing? All this will be answered in your plan hence making it easier to operate.
Wonderful! One step conquered! But here comes the next challenge: finance.
So, let’s say that you are looking to start that coffee shop after determining that it is a feasible plan in your geographical location. While most of us might have these amazing business ideas, unfortunately, we tend to lack the fund to start it.
The next critical importance of having a business plan: to lure investors. Yes, I used the term lure because we are trying to emphasize on the big bucks that your business will bring.
A component of a business plan is financial projections. Woah, wait a minute! What is that? I am just trying to start a small business, not be a finance guru! I hear you! I hear you! Let me explain it in simple terms. Essentially, a financial projection tells us what your company will be earning in the future.
For illustration purposes, let’s say our coffee shop’s financial projections show that for the next 4 years that it will be growing rapidly with profits of millions and millions of shillings with the potential of growing into a chain. The table below gives a general example.
| Year | Profit (Ksh) |
| 2020 | 1,000,000 |
| 2021 | 3,000,000 |
| 2022 | 5,000,000 |
| 2023 | 8,000,000 |
Investors like seeing their money’s worth and if you show them these financial projections, how likely will they be to invest in your company? The probability is very likely! So, go ahead and include this in your business plan.
Analyzing risks
Everything is looking good so far. Your idea of a business is not only feasible but you have also acquired funding to start it. Yeey!
Are these the only two reasons I need a business plan for? Definitely not!
So, refill your coffee, take a break if need be and let’s continue taking notes because there are definitely more reasons as to why you need to have a business plan.
Entrepreneurship is definitely not for the faint-hearted. It is risky and requires perseverance because believe me there will be days when you question the sole purpose of starting a business.
How do you analyze these risks in order to increase your chance of success? Write a business plan! Once you understand the market and how you are going to operate the business, you have already increased your chance of succeeding.
When it comes to risk, one of my favorite quotes is from the book Backroads Bosslady by Jessi Roberts: Don’t risk more than you can afford to lose. I like to call it making calculated risks. You weigh all your options and see if the business is worth it. Profit vs loss. The best way to do it? Once again, a business plan is the way to go.
Attracting buyers
If all those haven’t convinced you why you should have a business plan, maybe this will. A business plan is an asset. Really? Yes, it is! If down the line you want to sell your business idea and have a well-written business, guess what that means for you? Higher valuation!
A well written and easy to understand business plan is likely to attract buyers who might be interested in starting that specific business but don’t want to sit down and figure out how to go about operating it. Your business plan will be a guide for them.
Most business plan writers charge around 5000ksh. However, since it is your idea you can sell your whole concept for double or triple the amount. Moreover, if you already started the business and for some reason, cannot continue doing, you can sell the plan plus the business at an even higher price.
We are not limited with ideas. Meaning? We can have as many business plans and sell them. Consider it another source of income.
I hope by now your notes are full and you have already started making those mental calculations for a profitable business with a business plan.
Colin Powell once said, “there are no secrets to success. It is the result of preparation, hard work, and learning from failure.”
A part of preparation for your business is having a business plan. It is essential and would not only enable you to determine your business feasibility but also get you funding from investors, reduce risk and most of all, it is an asset to you.
So, what are you waiting for? START WRITING A BUSINESS PLAN!
Sahara A. Sheikh is a business management consultant, full-time mama to twin boys, and an ardent believer in being empathetic towards people. Follow her on Instagram @Zahra (z.a.s.y) . For consultations contact her on email at sahara.abdikadir@gmail.com
