Video: Why your business plan is the #1 crucial step when starting up

As you start planning your small business, it is important to know why having a business plan is such a crucial step to the success of your business in Canada.

While there are many successful businesses that have started without a business plan, the chances are if you have a business plan written, one that you have carefully thought through and planned, you will be in a better position than most business owners.

In fact, over 78% of small business owners fail within the first year and when asked why, it was due to lack of planning.

So let’s take some time together and see why it is so crucial to have your business plan ready when starting a business in Canada.

The video above, titled “Why your business plan is the #1 crucial step when starting up”, will prepare  you and educate you on the importance of a business plan.

This video is part of the small business video series, which you can access here to learn more about starting up, building a business plan, finding funding, and more.

How can a business plan be helpful?

Writing a business plan has always been seen as a frustrating process, a gruesome experience that nobody wants to do. But when starting a business, it is the one document that can literally mean the difference between success and failure.

Most people pour their heart and soul into their business. They invest quite a lot of time, in some cases, a lot of money – but the one thing most people forget about is the business plan.

The same document can determine how likely you are to succeed before you even try.

When deciding to get into a business, most people are eager to get into it – trying to make that first dollar; but leaving aside some of these crucial components, such as the business plan.

In a recent study, hundreds of entrepreneurs who have failed within the first year of business were asked why they didn’t do a business plan – and the top answers were; “I didn’t know how to write one”, and “I didn’t think I needed one”.

So, this is something we will be helping you with.

A business plan is not mandatory – but it is extremely useful for many reasons.

Despite the fact that people think a business plan is only used if you are looking for money via a bank, it is important to note that it can be used for multiple other purposes, as shown here:

1. To apply for funding ia a bank loan
2. To evaluate your business idea
3. To plan your business step by step
4. To determine your financial position
5. To determine your funding need

Most importantly, it will help you evaluate your business model on paper before you take further steps into it.

Evaluate your business idea.

One of the most important reasons why you should have a business plan completed for your business is to properly evaluate your business idea.

There are many ways to evaluate your business model and to see if it can be a success within the given industry.

With your business plan specifically, as you put together the various sections of your business plan, you will be discussing important aspects that formalize your business idea.

This includes a discussion on, your products and services.

As you put together your business plan, you will be talking about the products and services you plan on offering. It will allow you to go into deep thought on what you have to offer and will get you thinking about why you chose these products or services, what other products and services you can introduce, how you will charge for them, who will buy them, and so on.

In your research, as you develop your plan, you may find that a certain product or service may not be needed, while something else may be. These type of adjustments can help grow your business.

In addition to your products and services, you will also carefully consider your audience.

Who are your customers?

Are they mostly male, female, are they a specific age range, do they have specific income levels – what are their interests?

By doing a deep dive into your audience, you may determine a specific characteristic of a customer that may be your top customer; while you may also find secondary audiences that you can market to as well.

A business plan is never just a business plan on paper – but an evolving business idea.

As you’ve considered your audience, you will also determine your market. This will ensure that you can target your marketing strategies to the specific audience, to the specific location your audience is in and will ensure a proper and focused marketing spend.

Through the process, as you write your plan, you will be considering and outlining various business ideas, growth strategies and will be picking out the pros and cons of what you think will work and what won’t work. If done correctly, can be the only thing you need to run your business smoothly. It becomes your blueprint or road map to success.

But to really evaluate your business idea with your business plan, the financial section of it will help you determine what is possible if all goes as planned in terms of your revenue figures, but also in terms of your expenses, the day to day ones, as well as the initial startup costs. It will help you determine if you have what you need in terms of capital, or if you need to seek more.

If seeking more money, this brings you to another crucial reason why the business plan will be important. Be it that you access funding via a bank, private funding or government funding, a properly developed business plan will ensure your success.

Access Funding with your Business Plan

After you’ve invested time to complete a business plan, you will have a clear idea of your potential, the types of expenses you will incur over the startup process, as well, how much you can handle financially speaking on your own – or if you need additional capital.

Your business plan will help you access additional funding as well.

Most banks, private investors and even government funding agencies will always want to see your business plan before deciding to give you any capital.

It makes sense after all – if you haven’t invested the time into developing a business plan, most will assume you wouldn’t invest time into your business. This makes the business plan a crucial component if you are trying to secure funding.

But, not only that, your business plan will also have the needed components that funding agencies or lenders will want to review when determining if they can fund you – or not.

These components will heavily focus on your financial projections, including your balance sheet, cash flow statement or profit and loss statements.

If you are a startup, these projections may be difficult to do, but if you dedicate time to the research and evaluation, you may be in a better position than you think.

Be sure to review the videos in our financial series as well, to determine how to properly project your sales revenue, to determine your expenses and how to seek funding with your financials.

When looking for funding with your business plan, a funding agency or a lender will want to know about the potential earnings your business will have.

So, clearly explaining your strategy as to how you will generate sales should be your number one priority and a key focus in your business plan.

Be it that you explain how you will promote your business to get the sales, or that you will focus on a specific audience, your revenue strategy should be clearly explained.

The same can be done with the expenses. Most agencies and lenders will want to know what you plan on spending your money on in order to achieve that projected revenue. What are your initial costs? What are the long term costs? And what are those on-going costs?

Nobody want to fund a business that is going down quick.

So, be realistic.

Lastly, most funding agencies and lenders want to know what you can’t cover on your own in terms of those expenses – and what you need their support on.

Explaining your funding needs should be a careful, thought-through process that you may need help on. So be sure to work with a funding expert at Canada Startups who can help you determine this, and assist you with approaching these agencies and lenders to secure the needed funding.

Business Plan Statistics and Facts

• Entrepreneurs that take the time to create a plan for their business idea are 152 percent more likely to start their business

• Having a business plan creates a 30% greater chance of success.

• 78% of small businesses fail within the first year, and when asked, the key fact that they believe aided in the failure is lack of planning.

• Businesses with a detailed business plan are 50% more likely to obtain funding

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As we come to the end of the video, I hope you have understood why a business plan is such a crucial step when starting a small business in Canada.

Such a large percentage of business startups fail in the first year, and many of the common mistakes that cause this can be avoided with proper business planning.

A properly planned out business can not only help you with being able to explain what you want to do, but it can help you evaluate your business model in such detail that you can see all of the issues that currently exist, allowing you time to fix them before you launch. It can also help you determine where you fall short, especially if related to the lack of capital, so that you can have sufficient time to seek funding before you truly need it and your business is at risk.

Your business plan is one crucial document and should always be considered as the number 1 step to starting a business.

Whatever the case may be, so start a business in Canada, be sure to work with a Canada Startups expert who will help with your business idea, building your business plan and finding the needed funds to make your dream come true – and stay tuned for the next video in the series as we get into the finer details about the business planning process.

If you have found the above video helpful, review the other small business startup videos in the series as we will be discussing various things related to business planning and the required steps. These topics will range from the importance of your business plan, to the various components to include, tips and methods to get a plan in place.