You’re going on your dream vacation. You’ve been imagining this trip for years, and you’ve done so much work to get to this point. You booked a hotel, you bought new bathing suits for the whole family, and everyone is loaded up in the car, ready to hit the road.
And you decide to find your way there on instinct. No GPS. No map. Just pure gut feelings.
Would never happen, right? If it’s important to you to get somewhere, you’re going to do whatever you have to do to make sure you actually get there. You won’t leave it up to intuition and determination. You’ll make a plan.
It’s logical. But somehow, this idea gets lost when we think about building a company. Small business owners set lofty goals that they plan to achieve through “hard work.” Don’t get me wrong; hard work is important. But it’s a tool, not a strategy.
If you’re serious about building the business of your dreams, you need to sit down and make a business plan. This is not busywork. It’s not a formality. It’s an absolute necessity.
A Business Plan Tells You How Well You’re Actually Doing
I see it all the time. A business owner who made $200,000 in revenue last year is determined to make $1,000,000 this year.
Now, if he took the time to make a business plan, he might see very clearly that this goal is way too aggressive. But he doesn’t. So he works tirelessly towards this massive objective, and when he closes out the year with $500,000 in revenue, he is severely disappointed.
Now he’s going into the next year thinking he doesn’t have what it takes to build a million-dollar business, never mind the fact that he more than doubled his revenue last year. He should be celebrating! If he can do the same thing again this year, he will hit that $1,000,000 mark.
You may have heard it said before that we underestimate what we can do in the long-term while we overestimate what we can do in the short-term. With a business plan, we can set more accurate expectations. That doesn’t mean dreaming smaller. In fact, the business plan process often reveals that you can achieve a lot more in the long-term than you realized. But the important thing is gaining a clear understanding of what it really means to be doing well so you can build trust in yourself and your strategies.
A Business Plan Clarifies the Road to Success
The key to making more revenue faster is to understand where you have the greatest potential for growth and the greatest risk of waste.
Too often, business owners fixate on broad strategies like “running more ads” or “closing more leads.”
But ads for what? Which service or services are most likely to give you the biggest, fastest boost in revenue? Who should you be selling them to? What do you need to change about your sales tactics if you hope to close more leads? Is there any marketing strategy, product, or service that is failing to give you the ROI you expected?
A business plan also helps you dive deeper into those “branding” questions many business owners struggle with. Finally get a clear picture of your target customer, mission, and vision. Commit to the value propositions that set your business apart from the competition.
When you lay out all these details in one place, you have an actual plan. You know what to change, where to double down, and what to cut. Most importantly, you know what to measure so you can adjust any strategy that doesn’t perform as well as you thought it would.
This brings me to my next point.
You Get a Better Grip on the Flow of Money
As you create a business plan, you take a closer look at all the products or services you offer. How much of your revenue does each product or service bring in? What is your lead close rate for each of those services?
It’s important to know these numbers because this knowledge helps you close the gap between where you are and where you want to be. If you want to make $1,000,000, you need to make $210,000 in the service area that accounts for 21% of your income. This means $17,500/month. If the average job in that category is worth $3,500, then guess what? You need to book 5 jobs in that category each month. How do you do that?
You look at the lead close rate. You’re closing 50% of the leads you bring in, so this tells you that in order to book 5 jobs, you need to generate 10 leads.
A business plan also helps you strategize the money that goes out. Controlling expenses is the easiest way to control your business. And yet, so many business owners have zero strategy when it comes to expenses. They see many in their account as money available to spend.
It’s not. As your business grows, your expenses grow. A business plan helps you see the future so you can make sure the money you need for the next step is always there for you.
A Business Plan Helps You Communicate with Your Team
This benefit is huge.
A lot of business owners withhold their long-term vision from their team. Do not do this. It’s a huge mistake.
Your team can do so much more for you when they see themselves as partners in a mission. Share your goals. Explain the strategy. Tell them what’s expected of them and how you measure success. Clarify who your target buyer is, what their needs are, and how you aim to set yourself apart from the competition.
When you are open with your employees in this way, you empower them to take ownership in your company’s growth. They’re no longer just there to perform tasks; they’re there to help ensure success.
This is where a business plan comes in handy. Once you take the time to work through the details of your plan, it’s much, much easier to lay out your vision for your employees.
In the simplest terms, a business plan is a powerful tool because it provides clarity. You know exactly where you’re headed, how to get there, and how to measure your growth. Your employees know what they can do to contribute and grow within the company.
If you’ve never made a business plan before, there are plenty of resources out there that can help you, starting with the free business plan tool at Get Out of the Truck. (The tool is super easy to use; just answer a few questions and the tool generates a business plan for you.)
Whatever you do, don’t dismiss this step in business strategy because, well, this step is the business strategy. Without it, you’re meandering down an unfamiliar road, hoping to serendipitously stumble upon your destination.
I promise you, once you have the map in your hands, you’ll be glad you took the time to plan your route.