What is the real purpose of a business plan? Many entrepreneurs that I meet don’t think that they need one or they just don’t want to find the time to write one. Does having a plan guarantee your new venture will succeed? No! And not having one doesn’t guarantee failure, either.

Every time I teach the Business Plan Capstone at Keller Graduate School of Management, the first day is filled with questions from the students about why a plan is necessary and what value will they get out of writing one. Many students are concerned that if their business idea is not viable they will get a poor grade. In class, the plan is graded on how well the students support the idea with research and statistics. In general, a poor business idea is difficult to support.

A few years ago I helped a group of three write their business plan for a retail operation. We spent month on the details of how they would staff the store, purchase inventory, preform back office duties, etc. During the process of writing the plan, the three “owners” came to realize that they didn’t want to move forward with the business. Their reasons varied, but they gained clarity about what risks they were willing to take and how much effort they were willing to put into the business once it started.

While there are many benefits of taking the time to write a business plan, I see the five reasons below as the key drivers:

1. Viability. The exercise of writing a plan can help you decide whether or not the business is viable. It’s much easier to stop moving forward with an idea when you have invested little time or money. Once the business has started you’re more likely to keep pouring your money and your efforts into trying to make it succeed.

2. Direction. When researching your industry, competitors, and current market opportunities you may find that you see the business moving in a different direction than you first anticipated. As an example, Bill was interested in opening up a boutique grocery store. He wrote a full business plan with two of his friends. They were really excited about starting the new venture. However, their timing was a little off. Boutique grocery stores started popping up on every corner of the neighborhoods they considered opening their store. In addition, these stores were backed by large chains. They decided to forgo the idea. A few years later, Bill wrote another business plan for a different business. Within 6 months of completing the plan he opened up his wholesale business and was exceeding revenue projections.

3. Clarity. The outline of a business plan is fairly structured. You’ll be challenged to write a Mission Statement, a Vision Statement, establish your staffing plans, determine your break even point and much more. You’ll be much more confident about the purpose of the business and how internal and external factors will impact your success.

4. Road map. The business plan is a template to follow for both the start-up phase as well as execution of daily operations. Following the tasks you’ve established in the business plan will help you get up and running sooner with fewer mishaps. And it provides a base line for which to compare your results. Without a road map, how are you going to know what steps to take or when you need to make adjustments to the business? The plan can be adapted as any aspect of your business changes, such as product or service offerings, the entry of a new competitor, a recession, a economic boom, etc.

5. Commitment. The most important benefit, other than determining viability, is commitment. Writing the business plan is a level of commitment. If you don’t have the time to write the plan, then how do you think you are going to find time to operate your new business? If you are truly committed to your business idea, you will take the time to create a business plan.

There are many more benefits, what item might I have left off that you feel is worthy to be on the top 5 list?