Why Are Action Plans Important in Business?

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Why Are Action Plans Important in Business?
An action plan helps to keep your business on track. (Ryouchin/Digital Vision/Getty Images)

A business without a viable action plan is like a ship without a rudder. Because business success requires staying on course toward a long-term goal, it's essential to have a plan that you can follow. The trick to creating a successful action plan is making it ambitious enough to achieve growth and profit, but realistic enough that your business doesn't overextend itself.

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Knowing Your Business

The process of creating an action plan is just as important as the completed document. Business owners and entrepreneurs who outsource the creation of their action plans fail to understand the importance of the process of writing it. Writing an action plan has a steep learning curve, but when you reach its top you will gain a comprehensive understanding of what the goals of your business are and where it's going. This understanding is far more profound when you write the plan, instead of simply reading it. Look at the creation of your action plan as a school from which you must graduate to be qualified to start a business.

Avoiding Waste

One of the greatest hazards of moving forward without an action plan is the risk of wasting time, energy, money and other resources. A business can waste tremendous amounts of resources by pursuing avenues or projects that are not profitable and productive, or by pursuing worthwhile goals in inefficient ways. At best, these wasted resources cut into profit margins; at worst, they can mean the difference between thriving and folding. A concise and effective action plan serves as a map toward the goal of business success, and enables employees to work together to take the straightest road possible toward that goal.

Learning the Field

If you are a sensible entrepreneur, you already know a fair amount about your chosen field. However, you couldn't possibly know as much as you will after running your business for a few years, because most knowledge comes from experience. Writing an action plan will catalyse this process of education, and help you learn not only about your own business, but also about your competition and every other aspect of your field.

Working Through Mistakes

It costs a lot less to envision a mistake within the confines of an action plan, and then plan to avoid it, than it does to make a mistake and recover from it. By working through various hypothetical problems in the process of writing your action plan, you can prepare your business to steer around similar obstacles when you confront them in the real world.

Defining the Business

The Free Management Library states that it is important to clearly identify the purpose and goals of a new business. This is one of the main purposes of an action plan. Because the resources of an emerging business are often quite limited, it is important to use them to your best advantage. An action plan identifies areas where a business needs to focus its energies in order to create a winning strategy. The action plan also helps to build solidarity amongst employees, and to create a sense of identity within the business. Once the business emerges as a concrete entity within the minds of employees and prospective clients, its chances of success greatly increase.

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