A Business Plan Is Essential

What is the purpose of creating a business plan? Simply put, your business plan serves as a blueprint for your organization. Imagine that you were in the process of building a house. You wouldn’t just walk over to an empty lot and start hammering planks together.
However, unlike a house, a business does not stay stable. The common misconception is that a business plan is a single document that you put together when you’re first starting out and then put aside; the reality is that the business plan for every company will evolve over time as the company grows and that any major corporation could have many business plans as its objectives change.
When your company is in the growth phase, an updated business plan is beneficial for projecting and raising additional funding for expansion. As an added bonus, if you decide to sell or close your company, the business plan can include methods and deadlines for transferring ownership to new owners or for dissolving your corporation.
If you’re still not convinced, consider the following five legitimate reasons for creating a business plan before starting up a business.

1. To determine the viability of your business concept

Writing a business plan is the most effective method of determining whether or not a business idea is practical, aside from actually going out and doing it. The business plan serves as a sort of safety net in this situation. If working through a business plan reveals that your business idea is unviable, you might have saved a significant amount of time and money in the process.

It is common for a business idea to be discarded during the marketing analysis or competitive analysis stages, allowing you to go on to a new (and better) business concept.

Unfortunately, many potential business owners are convinced that their product or service is a must-have, and as a result, they do not devote the necessary time to conducting market research and developing a thorough business strategy. In order to thrive in business, you must first gain a thorough understanding of your industry, your prospective consumers, and the competitors in general.

2. To provide your new business with the best possible chance of success

Writing a business plan can ensure that you pay attention to both the broad operational and financial objectives of your new business as well as the finer aspects, such as budgeting and market planning, that are essential to success. In the end, the approach will result in a more seamless starting time and fewer unexpected problems when your business gets up and running.

Your target market, your unique selling proposition, optimal pricing methods, and the manner in which you intend to sell and distribute products to clients will all be defined through the process of budgeting and market planning. The development of an implementation plan will also aid in evaluating the starting and operating capital requirements for your business.

3. To Secure Funding

The majority of new businesses require finance for both their beginning and ongoing operations. There is no prospect of obtaining debt finance from established financial institutions such as banks or equity financing from angel investors unless a thorough business plan is in place.

Established firms usually require funds as well, for a variety of reasons such as the purchase of new equipment or real estate, as well as to survive market downturns. Having an up-to-date business plan gives you a much higher possibility of obtaining the funds you require to continue running or expand your organization.

In today’s world, investors and financiers are constantly seeking ways to reduce the risk of default, and word of mouth cannot replace the written facts and figures contained in a properly produced business plan.

4. To Make Business Planning Manageable and Effective

An effective business plan is crucial for anybody considering entrepreneurship, but it is also useful for those who already have a successful enterprise in place. Businesses that are successful are dynamic; they evolve and expand. As you create new objectives for your firm, it is necessary to alter the original business plan.

Reviewing the business plan can also assist you in determining which goals have been met, which changes need to be made, and which new paths your company’s growth should follow.

5. To Attract Investors

To attract venture capitalists or angel investors, you must have a good business plan in place before you begin marketing your company to potential investors. Although a presentation may stimulate their attention, they will require well-written documentation that they can review before they are willing to make any financial commitment.

Prepare to have your business strategy reviewed by a third party. To ensure that what is stated in your business plan is accurate, both venture capitalists and angel investors will do rigorous background checks and competitive studies before investing their money.

Conclusion

A business plan takes time to write, but it is vital if you want to start and grow an enterprise that will be successful once it has gone through its initial starting phase. If your company does not yet have a business plan, it may be time to begin drafting one. New start-ups can also seek help from Sanjeev Chitre‘s well-written book, What Not to Do in Entrepreneurship, to get professional guidance on how they can become successful corporations. The process of drafting a business plan can be extremely beneficial in terms of clarifying where you’ve been and where you want to go.