Why a business plan is essential for small businesses

Authored by Alex Wheal.
4 min read
Notes on Whiteboard
Six reasons you need a business plan and how you can use it to achieve your goals, according to Virgin StartUp’s Sophie Mackintosh.

A strong business plan is the foundation of any small business, whether you’re a startup or looking to grow. While putting together facts and figures isn’t the most thrilling use of your time, especially in those exciting early startup days, it’s essential if you’re going to give your business the best chance of survival – and the best chance of growth.

Here are six reasons to create a business plan for your startup.

1. It provides you with a map

Think of your business plan as a roadmap for your startup’s journey. You could hop into the car and get driving right away, but at some point you’ll get lost, or come to a point where you’re not sure which direction to go in. Creating a business plan lets you set out your timescales, your objectives, and the steps you need to take in order to make your business a reality. So when you’re feeling lost, confused, or things change, you can take a look at your business plan and feel empowered by the fact that you’ve GOT this – you know what you need to do and what the next stage should be.

2. It solves your future problems

Doing a business plan forces you to run through your business in advance, rather than just skimming over things or deciding to chance them. You’re forced to think about the hard questions, such as – is my price point high enough? Or is it too high? Do I have the correct licence? What equipment do I need immediately, and where can I get it? Are my premises suitable? Better to face up to these problems and find solutions for them now, rather than be hit when they arise in the future. Make a cash flow forecast part of your business plan too, so you can see if the costs all square up – and be brutally honest. It’s always better to overestimate and end up with a bit of spare cash.

3. It keeps you accountable

It’s easy for life to get in the way when you’re starting up, especially if you’re working at the same time. Suddenly three months have passed by, and you’re not where you thought you’d be with your business – it can feel discouraging.

But by making goals, targets and timeframes in your business plan, you can keep yourself motivated and always remember to be working towards the next thing. Think about tangible things you want to achieve in a month’s time, three months, six months, a year. What do you have to do to make them happen?

4. It gets people on your side

If you’re applying for funding, seeking investors, or looking to work with other businesses, a business plan is a must. It shows that you’re reliable, that your idea is going to work, and that you’re committed to making this business a success. Show people exactly why they should work with your business with cold hard facts that nobody can argue with – market research, cash flow forecasts, and early orders.

5. It gives you a Plan B

Nobody likes to think about their startup failing or running into trouble, but it’s important to think of a contingency plan that will support you should the worst happen. Building this in from the beginning isn’t setting yourself up to fail, but giving you the best chance of saving your business. Is there a way you could pivot? Is there an alternative income stream you could rely on, even for a bit? Face the worst head on and plan, plan, plan ahead.

6. It helps define your purpose

What’s truly at the heart of your business? What’s the passion that drives you, your reason for starting up at all? With all the work that goes into running a startup, you can lose sight of what’s really important to you. But building your mission and purpose into your business plan keeps you focused, so that when times are difficult you can remember just why you’re doing this – and keep working towards your ultimate goals.

Get started on your own business plan with this free template from Virgin StartUp. (external link) Whatever your venture, whatever your plan, make sure that small business insurance is there to support you on the way. Find out more about the right cover for a growing business in your sector and get a quote today.

At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.

Alex Wheal

As a Commercial Client Manager at Hiscox, Alex works closely with technology start-ups to help them understand, manage and insure against key risks, particularly as they look to scale.