Why Business Plan?

Why Business Plan?

Insight on Why Business Plan?

A plan is how you drive the future. Nearly all business experts agree on one thing: the importance of drafting a business plan, whether you are at the start-up stage, have been in business for years, or are ready to grow. The primary purpose of a business plan is to define what the business is or what it intends to be over time. In fact, a business plan is much more than that: It’s a tool for understanding how your business is put together. One can use it to monitor progress, hold yourself accountable and control the business’s fate. And of course, it’s a sale and recruiting tool for courting key employees or future investors.

When starting a business, Business plan is one of the most crucial part. Get it right, and you’ll earn the trust of investors, distributors, suppliers and staff. Get it wrong, and your business could face huge problems just getting off the ground a business plan can help one turn their ideas and capital into a viable business, secure financing from lenders and investors, identify strengths, weakness, opportunities, and threats. For an existing business, a business plan is a document which sets out in detail exactly how to run your business, and includes everything from how to   promote it to how to plan to fund it and identifying your customer. business plan helps to Communicate your vision to employees and external parties, develop accurate financial forecasts compare planned versus actual performance. For growing business, business plan will include details of financial forecasts, how much investment will be need to finance the business and plan for raising funds, as well strategy to manage growth. Many business plans include a section explaining how many employees should be hired and at what stag of the business to recruit them. When exiting business, a business plan can help you develop a plan to transfer ownership, sell or close business. The general benefits that every type of company can get through having business plan is discussed below:

  1. To Understand company context

A Business plan contains clear statement about business mission and vision which helps to position company in the overall marketplace. Setting out an accurate plan will help to determine whether business idea is feasible or not. By making cash flow, sales and other financial forecasts and looking at what sort of target market one will have, one can work out whether the idea will work as a business and how easy it will be able to monetize. 

  1. To determine course of action

A business plan already comprehends the possible threats the company can face and had a clear-cut plan to address them. Clear direction of business allows to understand what needs to be done for forward movement. The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt. Without a business plan, one may shift your short-term strategies constantly without losing focus on long-term goals. It will allow to come up with a comprehensive strategy on how to deal with various scenarios. 

  1. To understand your competitors

A Business plan provides a clear portrait of organizations major and potential competitors and strategies for facing them. One can calculate competitive advantage over your competitors and prevail on own business. 

  1. To understand your customers

Business plans include detailed market research looking at how big your market is and who your customers are. How are you going to reach your customers? How will you retain them? What is your advertising budget? You will segment your market depending on information such as your customers’ spending habits, interests, earning power, age and socio-economic groups and define the best strategy for market penetration. 

  1. To establish Business milestones

As part of operational plan, you’ll lay out major marketing and operational milestones. The business plan clearly lay out the long-term milestones that are most important to the success of your business, like how much customer you shall reach on a year, how long it will take to attend Break-Even stage.

  1. To attract investors

The development of a comprehensive business plan shows whether or not a business has the potential to make a profit.” By putting statistics, facts, figures and detailed plans in writing, a new business has a better chance of attracting investors to provide the capital needed for getting started or further growth. 

  1. To attract talents

The written record of goals coupled with a track record of delivering against those goals sends a message loud and clear: one understands their business and can deliver; great employees will respond to that message attracting more talent. When a prospect asks to understand your business, you can hand them a plan that gives them an entire overview. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its goals.

  1. To evaluate company success

A formal business plan is a tool to compare actual operational results versus the targeted goal. In this way, it allows one to clearly see whether one has achieved their strategic, financing, and operational goals or not.

  1. To stay focused on main goal

A business plan is a blueprint one can use to focus energy and keep company on track. A complete, thoughtful business plan is one of the most valuable tools in helps to reach your long-term goals. It gives business direction, defines objectives, maps out strategies to achieve goals and helps to manage possible bumps in the road. 

  1. To manage organization

A set of values that can help to steer business through times of trouble.Benchmarks  to track performance and make midcourse corrections.A clear-eyed analysis of industry, including opportunities and threats. Business plan gives a place to list specific goals and objectives for business, helping to set out clearly how to meet these goals and on what sort of timescale, and forcing one to commit to that course of action. Moreover a business plan conveys the organizational structure of business, including titles of directors or officers and their individual duties. It acts as a management tool that can be referred to regularly to ensure the business is on course.

It’s not compulsory to have a bulky business plan from the start, rather It should start small and grow phenomenally. A business plan is not a document one create once and store in bottom drawer it’s just as important to keep it up to date. It’s a living guide that should develop as business grows and changes. Successful businesses review and update their business plan when circumstances changes.  A process should be established to review business plan regularly.Organizing brainstorming sessions is a good way to benefit from employees knowledge – it ensures that all are on the same page. Businesses evolve and adapt over time, and factoring future growth and direction into the business plan can be an effective way to plan for changes in the market, growing or slowing trends, and new innovations.

Altogether just passion and optimism is not enough to build a successful company, one need a road map to control, convey, evaluate and manage the company. Something which provide accurate insight of business. business plan is the most important management tool in that sense, It defines your strategy, tactics, and specific activities for execution, including dates and deadlines and budgets and cash flow. There is no excuse for having business plan. Even if it seems Irrelevant and hassle initially, business plan will prove to be far more effective in the long term. Having a business plan conveys that one is really serious about business and its success.

Myth of a Business Plan

  1. I don’t have time for a Business Plan – A business plan will save a lot of your time in future due to proper planning.
  2. I don’t have money for a Business Plan – A proper business plan is a best tool to attract possible investors.
  3. I know my business very well – I don’t need a written plan. Knowing alone is not enough. You should be able to communicate your business effectively with your employee and other interested parties where business plan comes to play.

References:

  1. www.articles.bplans.co.uk
  2. www.thebalance.com
  3. www.entrepreneur.com
  4. www.business.gov.au