Too often, business plans are only thought of in relation to obtaining funding for a business. In fact, a business plan is much more than that. It is a valuable tool for every business owner from start-ups and those looking to grow, to those that have been in business for years. Creating a business plan makes an owner take a holistic view of their company, and the sector in which it operates.
There are several key reasons why business plans are essential, amongst these are the following:
To Achieve Clarity
The primary purpose of a business plan is to define what a business is and what it intends to be over time. It translates thoughts, ideas and aspirations into facts, figures and future projections and is most often developed during the conception stages of a business idea to test its viability. It can, however, also continue to develop when a business is running. By looking at the market and making cash flow and other financial forecasts, many potential problems can be identified. Rather than having to be dealt with unexpectedly further along the line, these can then be planned for and solved.
Map the future
The planned strategy sets out the path that will lead the business from where it is now to where it is going and incorporates all marketing, financial and operational aspects of the business. What is the sales and marketing plan? How is the company going to run on a day to day basis in terms of processes and staff? These are all questions that must be addressed. Developing a roadmap for the business and setting out what needs to be done to achieve specific goals will increase commitment to a particular course of action. It also increases the likelihood of long-term success without too many distractions along the way.
Writing a clear business plan will make it easier for the business owner to explain the idea to others such as banks or investors. New businesses need both operating and start-up capital while established businesses often need funding to expand. There is little hope of obtaining money from an established financial institution or investor, or via one of the crowdfunding platforms, without a comprehensive business plan that shows the lender that the business is being taken seriously. While a business plan doesn’t guarantee the needed funds, it is essential for it to be given due consideration in the first place.
Businesses evolve and so the business plan needs to be under regular review. This process provides an opportunity to track progress against strategy and objectives, and formulate a direction for the coming year, taking into account any lessons learned or changes to the environment in which it operates.