According to Google, a business plan is “a written document describing the nature of the business, the sales and marketing strategy, the financial background, and containing a projected profit and loss statement”. It is a road map, that if made thoroughly and accurately, will provide directions to help your business avoid bumps in the future.
Your business plan should conform to general guidelines and must include the following: Title Page and Content, Executive Summary, Description of Business, Description of Product or Service, Market Analysis, Competitive Analysis, Operations & Management Plan, Financial Components, and Supporting Documents such as your resume, contracts with supplier, etc.
These sections will help you address relevant questions that you, and other people who might read your plan, will most likely ask.
To help you see the importance of having a business plan, we’ve compiled ten reasons why having one would be a valuable internal tool for your company.
Starting a business requires you to objectively see if your idea will yield the results that you want. Regardless of the reason, a lot of businesses still fail to make it beyond the first few years of being in the market. This is where an exceptional business plan comes into play. A business plan is one way to evaluate an idea before you commit to pursuing it. The process of creating the plan can reveal factors that you might not otherwise consider, which might save you from making rash decisions.
There’s so much you don’t know about when you’re just starting out. From your customers, your competition – even how you’ll run your operations. Therefore, you need a business plan to reduce the risk of pursuing the wrong opportunity. As a business owner, this will help you uncover weak spots, flaws, and will allow you to create contingency plans. It will also provide a crystal-clear view of the products and services that you want to offer; therefore, you can adjust your business accordingly.
You can use this document to set high-level milestones for your company and guide your sales and marketing strategies. This is to keep everyone informed about your company’s objective and ensure that every team is working towards the same priorities. It is also imperative, especially in the early stages of the company, that the founding members are on the same page to move the business forward – because a business plan without a goal is useless.
Information about your customer and competition must be a part of your business plan. It needs to be comprehensive and should include data like customer behavior, demographics, income bracket, geographic factors, and more to help you easily identify your target market. If you also have an in-depth analysis of your direct and indirect competitors, you have a better understanding of your company’s competitive advantages.
Writing and reviewing your plan regularly gives you better insight into what you need to do to continuously improve. With your business plan as your guide, you can stay organized and remain committed to long-term goals. According to research, SMEs that plan and review their results tend to grow 30% faster and are less likely to become a part of statistics on businesses that fail.
As your business grows, some of the challenges that you’ll face will be related to your finances. A good business plan will help you connect your cash flow – this takes preparation and management. However, there are times when sales on account, physical products, purchasing assets, slow-paying customers, or repaying debts might make your business suffer; that is why a plan will help you see foresee problems like these and adjust to it accordingly.
A business plan plots your operational course, especially in times of doubt. A lot of factors can affect your business’ growth including overall economic trends, location, market need, and more. Nevertheless, having a plan laid out will allow you to move proactively towards a defined objective, rather than just reacting to business events. This may result in realizations of short-term goals but compromising long-term milestones.
If you want to ask a bank or venture capitalist for funding, they will want to see your business plan to help them decide if your firm is profitable; and you have a good handle on your small company’s trajectory. This may also include your financial forecasts; therefore, they will see that you have a market.
Good planning sets expectations and tracks results in your company. It can be a tool for regular review of what’s expected and what happened every business quarter. A well-created business plan will allow decision-makers to step up, articulate their plan, and force them to come up with strategies to have consistent progress.
A professional business plan allows you to identify how different parts of your business function, and how interdependency happens. It differentiates the titles of your directors, staff, and their various duties – which in turn creates a strong internal business structure since everything is clearly described there.
Finally, to be a proactive businessman you need to have a solid business plan. Since you now possess all the tools you need, more often than not, you don’t wait for things to happen anymore, you now plan them and execute them with ease.