One of my friends has been seriously thinking about starting a small business on the side to help make ends meet. The first step he took before starting his business was creating a business plan. This got me wondering what a business plan is and why it is so important.
A business plan is like a map as it provides clarity of where your business is going and what is needed to achieve its goals. It should ideally be clear and easy to read and comprehend. Creating a good business plan before starting your business will without a doubt increase your chances of success.
A business plan is important as it helps a business keep track of its progress and focus on its goals. It is also acts as a guiding tool for you as a prospective business owner in making strategic decisions on different aspects of your business. If you are looking to raise funds for your business, a business plan will play an important role in helping investors understand more about your business and see whether it’s worth investing in or not.
My research also enlightened me on what a business plan is not; and that is a static document. What this simply means that as your business grows, you need to update your business plan to incorporate new factors affecting the running of your business.
Who needs a business plan?
A business plan is crucial not only for small businesses starting up but also for established businesses.
What are the benefits of having a business plan?
Having a good, well-written business plan in place, better equips you to make sound business decisions, leave less up to chance and focus on a clearer potential view of what your business could grow into.
Here is a list of my top 10 reasons why I think you need a business plan below.
1. Attract Investors
You may have all these wonderful ideas on how to make money but without a written business plan, it will be next to impossible to get potential investors onboard. So ensure you have a well written business plan in place showing what you are looking to do, the chances of success and how much money you will need to make it happen.
Having a business plan in ready is key when it comes to seeking investors, be it angel investors or venture capitalists. While a great presentation may serve to get them interested, it will be mighty hard to get them to commit to your business without a well written business plan.
Expect potential investors to conduct their own extensive background checks and competitive analyses to make sure that what your written business plan indicates is truly the case.
2. Grow your existing business
A good business plan will go a long way to help you establish strategy and allocate your available resources strategically according to priority.
3. To help you communicate with potential stakeholders
A good business plan serves as a communication tool that you can utilize when looking for financial aid from investors or various lending institutions.
You can also use your business plan to get people to work for your business, to acquire credit from suppliers, and to draw in possible consumers.
4. For Manageable and Effective Business Planning
While a business plan is vital if you’re looking to start a business, it is also an important tool for established businesses. This is because viable businesses are bound to change and grow with time. Your original business plan needs to be revised as your business grows.
5. To help you stay focused
A sound business plan will help you keep your eyes on the goals you’ve set and stay focused on the strategies that will help you achieve these goals.
Reviewing the business plan is also a great way for you to check out what goals you’ve been able to accomplish, what changes you need to make, and the direction your company’s should take for further growth.
6. To help you identify potential pitfalls
Having a business plan helps you identify any weaknesses in your idea. And because it is so well written, other people be it friends or expert business owners can check it and give you their advice and thoughts.
7. To help you in decision making and setting objectives for management
There are various aspects of a business including; management, human resource planning, technology and creating value for your customer. Having a business plan will help you define these aspects
A business plan is important in providing structure and management objectives to a growing business. You can use it as a tool of reference to help management achieve and stay on track with sales targets as well as with other operational milestones. Ensure you use your business plan properly and refer to it regularly, to help you take stock of what your business has achieved and what more is required to keep it growing successfully.
Remember to include insurance coverage in your business plan. This will ensure that your business is covered in the event of calamities such as fire and burglary so that the operations of your business keep going.
8. Back up a business loan application
Just like investors, lenders will want to take a look at your business plan before they commit to lending you any financial aid you may be seeking from them.
9. Getting the right people onboard
For a growing business to do well, it is crucial that it attracts the right staff and partners. A good business plan helps bring in the right talent, whether in the executive level or skilled staff, by demonstrating to them the direction and growth potential of the business. It is also a great tool in securing vendor accounts, more so with exclusive suppliers.
A business plan may also be needed when retaining the services of other professionals such as landlords, attorneys, accountants and consultants.
10. To minimize risk
Getting into entrepreneurship is risky business. You are never sure of anything. However, you can better manage that risk once you’ve tested it against a well written business plan.
Reviewing revenue and expense projections, coming up with logistics and operational plans, and understanding the competitive market you are delving into can all help minimize the risk factor to a point where you are able to make profits, fairly comfortably.
I am sure there are many other advantages of having a business plan but one thing that I have realized is that with a good business plan, your business has higher chances of succeeding.