As I have stated previously: businesses don’t plan to fail, they fail to plan.
There are a number of advantages for preparing a business plan. Before establishing my own law practice, Carabash Law, and before I set out to develop Dynamic Legal Forms, I not only wrote comprehensive business plans for each, but I also came across different authors’ rationales for having a business plan to begin with. I think that reiterating their views here is important, so here I go…
The most obvious reasons for a sole practitioner to have a business plan are noted in the following passage taken from Wendy E. Oughtred, Going It Alone: A Start Up Guide for the Sole Practitioner, (Aurora, Canada: Canada Law Book Inc., 1995), p. 15:
At the outset it will help you get organized, provide you with important information for use in making critical decisions and give focus and direction to your efforts. As your business grows, your business plan can help you in deciding when to make major changes, such as hiring a secretary or clerk. It can also assist you in keeping an eye on the overall financial health of your business as external circumstances change, a most crucial function. Many sole practitioners are barely getting by financially and it must be stressed that you cannot afford to lose overall financial perspective. Most importantly for business start-up purposes, a well thought out financial plan may play a pivotal role in your proposal to the bank for financial assistance in the form of a term loan and/or credit line.
Here are some additional passages which should help sole practitioners understand the importance of having a business plan (taken from William Huss, Start Your Own Law Firm: A guide to all the things they don’t teach in law school about starting your own firm, (Illinois, U.S.A.: Sphinx Publishing, An Imprint of Sourcebooks, Inc., 2005), pp. 25-26):
Your business plan will not only help you steer your firm’s development and keep it on track, but it will also assist you when you are seeking credit, applying for financing, taking on new lawyers, and managing your public image.
The most important reason for creating a business plan is that it motivates you to focus on the entirety of the scope of your business. It not only acts as a roadmap, but also it acts as a means of evaluating your strengths and weaknesses as a business owner.
For example, you may find that one of your strengths is the location of your office and its proximity to potential clients. You may also find that your weakness is as existing client base. You may want to reschedule the opening day of your offices until you have a client base that will support the renting or leasing of spaces, acquiring equipment, and hiring support staff.
Many of your important decisions can be made much more easily and intelligently when you develop your business plan early in your planning for starting your law practice. Your business plan defines the nature of your business, your customers, your resources, your competition, your short- and long-term financial projections, and your marketing. It should be built on specific and realistic terms – measurable objectives identified responsibilities and deadlines, and practical budgets. Avoid hype, jargon, superlatives, and uncontrolled optimism when preparing your plan. Work toward a plan that is straightforward and simple, so it is easy to implement and easy to update as your business grows.
Finally, L. Joseph Schmoke and Richard R. Allen note the following 7 reasons why every business should have a business plan in their book entitled Vital Business Secrets for New and Growing Companies, (Illinois, U.S.A.: Dow Jones-Irwin, 1989) at p. 23:
1. It is virtually impossible to raise money for a business without a business plan.
2. A business plan forces you to examine and consider each and every facet of your proposed venture, including the details which can make or break you in business.
3. Once you begin running a business, you will be constantly distracted by little details which are non-productive. These distractions tend to obscure your original objectives, and a business can begin to drift without direction. A specific plan focuses your time and energy on the original business objectives.
4. Business is ‘doing battle’ with the competition for the consumer dollar. Successful generals do not enter a war, or even a minor battle, without planning their strategy. A complete business plan is a clear, written strategy for winning a battle in the marketplace.
5. The ‘concept’ for a business is an intangible thing. You can’t see it or touch it, and neither can other people, such as investors, partners, or key employees. A written business plan is tangible evidence of your thoughts, concepts, and research. It can be seen, touched, and studied. This is a tremendous psychological advantage.
6. A business plan tells people – investors, lends, you – where you are going and how you intend to get there. It is your roadmap, and without it you might end up traveling in circles.
7. A business plan makes the difficult task of starting, running, and building a business much easier. Just ask those who have attempted start-ups both ways: they can attest to the value of this essential tool.