10 Reasons You Need a Business Plan to Succeed

Creating a business plan is important for your business in several ways. Why do we need a business plan? Business plans are useful for getting financial help for your business. But, there are many other reasons as well for following a business proposal.

• What is a business plan?

Business plans are like a guide or roadmap that show the goals and ways of achieving those goals in a business. Business plans need not be long formal ones and there are many experts you can hire for writing out your business plan. You can write a business plan for submitting to potential investors or banks, or just write it to get your own financial goals clearly spelled out.

• Must Read – What it Takes to be a Successful Entrepreneur

In short, your business proposal is just a plan detailing how you plan on going about your business and how you will make it succeed. How to make a business plan?

• A brief summary, statement of purpose or a business plan outline is the first part of your business plan format.
• Business or industry description is an integral part of the business plan structure.
• Your product, advertising plans, promotions, customer service etc.
• Factors for profitability ( this is important for a potential financier).
• Marketing strategies, target market, market share, market analysis, sales plan, logistics, business location, equipment needed, financial projections etc.

 

(Source: articles.bplans.com)

• Description of management team, founders, registration details etc.

Here are the top reasons for preparing a business plan:

1. Checking Out Tenability of your Business Idea with a Business Plan

A business idea is just a Eureka moment, but you need to check out the feasibility of the idea before investing money in it and rolling it out into a full fledged business.

• While writing a business plan, it includes a market research or survey. It reveals information about the target audience, their preferences and expectations. You can check whether your business vision is in line with these expectations and whether your ideas will work out.
• The industrial analysis in your business plan can give important information about competitors and their strategies, for a big as well as small business plan.
• Market analysis shows latest trends and changing preferences with historical data, that you can use to confirm the feasibility of your business idea.
• Financial projections will help you know the breakeven point and feasibility.

2. Understanding the Market

• You get a better understanding of the market with a startup business plan.
• You can study the latest trends in the industry and your target market.
• It helps you check out the competition and even learn from their mistakes. This helps prevent losses occurring from your own business blunders.
• You get information in advance and this helps you prepare for market issues beforehand.

3. Sell your Business: Get Funds/Loans/Investors with Business Plans

It’s the most invaluable tool for getting business loans. It can dramatically enhance the chances of getting a loan or funds for your business if you use these business plan do’s and don’ts.

• Lenders are more likely to give you a loan if you explain how you will serve your customers, deliver the product and how much revenue you are likely to make.
• You will get more credibility amongst lenders when they see a list of skilled, knowledgeable and experienced team members in your plan. This marks the importance of business plan to an entrepreneur.
• The plan gives lenders more knowledge about the market you are planning to serve, the possibilities of its growth, the competition, the social media strategy, advertising etc. you are planning. This increases your chances of getting funds.
• Financiers can check out the financial health of the business by viewing details of the revenue, the business assets, repayment modes, liabilities. These give a clear picture of whether your business will be able to repay the loans.

4. Benefits for a Growing Business

Though a business plan is basically useful for getting funds during the initial starting up phase, you also need it as an ongoing plan to expand your business.

• An ongoing plan will help you monitor and check whether your business goals are being achieved or not.
• Making a business plan will help identify the direction in which you need to be moving to expand your business.
• It will help you meet targets and adjust your priorities.
• A regular update is essential for success. This means you need regular meetings with the important team members to update your plan continually.
• A regular assessment of objectives and performance can help you achieve goals more easily.
• It will also help you when trying to sell your business to a potential buyer.
• An ongoing business plan will increase confidence in your business among customers, your employees and your suppliers.

5. Commitment to a Specific Course of Action

Your plan can help you make many business decisions more easily.

• Deciding on whether to rent a space or not.
• Hiring people for your growing business. Your business plan can help you decide.
• Buying assets. Deciding how many assets you need to buy. Whether you need to buy these assets or can just lease them.
• Using the plan to train new employees.
• Make alliances by using your business plan as part of the communication.

6. Advantages of Business Plan: Managing Cash Flow

A good business plan helps in forecasting and better management of cash flow. The best of strategies might fall apart if you do not have enough cash to pay the bills. Cash flow is the life blood in a business.

• It can predict the amount of money that you will need well in advance.
• It will give you details about your savings; liquid securities; your checking account and so on that you can spend.
• You could be making a profit and yet not have enough cash flow. For instance, you might have invested a lot in inventory and assets, but this is not liquid cash.
• If the plan shows a positive cash flow, you can increase investments, such as hire more employees or start operations in an additional location and expand your business.
• If the cash flow shown in your plan is negative, you can start cutting back or reducing. For instance, you can rent that 400 sq ft space instead of that beautiful 800 sq ft one you’ve been eyeing. Or control the merchandise you’re purchasing.

7. Setting Specific Goals

By using the specific goals mentioned in your plan, there’s less risk of making the wrong decision and wasting your time and energy.

• Specific goals set out in your plan help you move in the correct direction, for both a startup as well as an established company.
• A specific goal could be improving on your customer service. A plan defines such steps clearly and makes it easier for you to accomplish it.
• A plan gives details of steps to be taken and the time to take these steps. These are specific numbers and specific dates.

Tip: For instance, you could specify that you want to attract customers by giving them online freebies to the tune of $1000, by the 1st of September.

8. Attracting Customers

You’d have thought such a plan is an excellent means of attracting financiers for your company. True. But there’s more to the story. You can also use it to attract potential customers.

• You can set goals like increased number of membership signups, or Increase the social interaction levels.
• Your plan can contain buyer personas, using which you can view your customer’s mind, their problems and how you can fix them with your product. Plans help you know and understand your customer better.
• Mapping the conversion process in your plan can help you identify any blocks or gaps in your system.

Tip: For instance, your plan could specify how customers access your website, through social media, search methods, etc.; where they arrive on your website; analyse the content leading to the conversion page and so on.

• Also Read – 10 Effective Ways to Increase Revenue for Your Startup

9. Employing the Best Strategies

 

(Source: epms.guru)

You might dive into the wrong strategies in your enthusiasm to dive into the business. But a plan will help you analyse and pinpoint the perfect strategy suitable for your business.

• It provides you with a big picture, so that you can set priorities for tasks to be handled first.
• Your plan will tell you which goal is more important, so you can maintain a better focus on achieving the prime goals first.
• It also prevents you from becoming overburdened or overwhelmed with multiple goals, as there is a clear path indicated for reaching each goal.

10. An Exit Strategy

There might come a point where you might be forced to sell your business. Your business plan contains an exit strategy that you can readily access in case things do not go the way you plan them.

• Your plan mentions different exit options, such as IPO or Acquisition/Mergers.
• You analyse exit strategies, both successful and unsuccessful ones conducted by other businesses in your industry. This helps you understand which strategy will work best for you.
• A regular updating of your business plan will give you a better picture of the changing market trends and how this might affect your profits in case you plan an exit.
• It gives you more control over your business, so that you can maximise your profits during an exit, otherwise you might end up selling your business at a loss.

Wrap Up

It does take time to write a proper business plan, but it is essential for a startup. It offers clarity on your goals and the means of achieving them to make your business a thriving and successful one.

Without a business plan, your business is rather like a boat without a rudder. Your business plan is your mission statement and your vision. Create a plan, do not just wing it, because then you’re only setting yourself up for failure, not success! I agree a business plan cannot guarantee success, but it can surely reduce the odds of a failure. I assure you it will be one of the best decisions of your life!

Cover Photo by Pexels