Many entrepreneurs are not aware of the importance of business planning. Some believe that a Business Plan is something that is hurriedly put together when the company needs a bank loan or is seeking outside equity capital. Actually, planning is one of the most critical business functions; success is very difficult to achieve without proper planning. Planning is also an ongoing function. Because the business environment changes so rapidly, you can't simply do an annual budget, tuck it away in a drawer and say you are all done with planning until next year. You need to update your forecast and strategies periodically during the year, quarterly at the very least.

The Business Plan document you create can actually save your business money, in a number of ways. First, it can help you reduce expenses. You might start your budgeting process by building a spreadsheet showing how much you spent in each major category last year, and then have a column next to that for your forecast expenditures for the upcoming year. There are bound to be categories where you can cut costs if you think creatively. Changing vendors is one example of how costs can be cut. We all get in a rut of just paying bills as they come in, without considering whether we are paying more than we need to. Categories such as shipping costs, insurance, travel and entertainment, and bank service charges are all areas where researching alternative vendors can lead to substantial savings. But you have to make the effort to seek out these savings.

A rigorous planning process can also help you uncover exciting new revenue opportunities for the coming year. Have a planning meeting with your management team where you brainstorm ideas for new products or services you could offer. Many times we overlook or underestimate a significant asset our company possesses: the skill sets and experience of our managers and employees. And the great thing is, these assets are already there, ready to be deployed. Better utilizing them will not cost any additional money. Small companies are not as burdened with the rigid hierarchy that large, unwieldy enterprises labor under. Encourage your employees—all of them from the janitor on up—to contribute ideas that might save the company money or increase revenues, and be sure to reward the employees whose suggestions you use.

The planning process also forces you to take a critical look at how your company shapes up versus its competition, and how the competitive landscape is changing. Do you know how your products or services are priced versus your major competitors? You should. Do you know how your products and services are perceived by customers, versus your competitors' products or services? You won't know unless you take the time to ask them.

The planning process also forces you to critically examine your business strategies, and determine what worked, what didn't work and what can be improved in the coming year. This can be an eye opening, even sobering experience. Continued business success requires an attitude of constantly striving to do everything more efficiently, to improve every aspect of your product or service offering to keep ahead of your competitors. Companies that are content to do things the way they've always done them usually end up suffering a decline in market share and profitability. Unfortunately, some the mightiest corporations in America have had to learn this lesson the hard way.