Importance of a Business Plan
Developing a business plan is the first step to a successful business. Planning is one of the most important parts of running a business, no matter whether it is a large multinational corporation trying to plan an expansion or a small business launching an exciting new product. Most businesses start with a great idea, but in order to take that idea and develop it into a successful company, it’s vitally important to have a business plan. That plan is much like the nervous system of the business: It connects all the parts together and can tell you if a one piece of the company is injured.
Here are the reasons we believe, you absolutely must have a business plan.
1. Thought Process Commitment
By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can detail alternative future scenarios and set specific objectives and goals along with the resources required to achieve these goals. By understanding your business and the market a little better and planning how best to operate within this environment, you will be well placed to ensure your long-term success.
2. Solve Issues before they Start
Developing a business plan can help you identify problems that may arise in the future and stop them before they become a disaster.
3. Estimate Your Startup Costs
While creating a business plan, you can more clearly determine your startup costs. A strong plan can also help you wisely spend those funds, get the most out of your money, prepare for future expansion and also prepare for unexpected costs.
Being organized is an important asset in your business toolbox. Having a carefully created plan from the beginning will organize your ideas and goals and allow you to truly understand how you want your business to work.
5. Support Funding Requirements
Most businesses face investment decisions during the course of their lifetime. Often, these opportunities cannot be funded by free cash flows alone, and the business must seek external funding. However, despite the fact that the market for funding is highly competitive, all prospective lenders will require access to the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. In essence the former helps bankers or investors understand the past, whereas the business plan helps give them a window on the future.
In all, writing a business plan will also help you to think more analytically than ever before about your industry and the role of your business within it. It will help you to see correlations between the different parts of your business e.g. how decreasing the cost of a particular process will affect your overall profit margin.
The value of a business plan simply cannot be overstated. Putting ideas and concepts down on paper is invaluable and the act of researching and compiling data about your competitors and the market will prove to be very useful in the times to come.