A business plan is a roadmap or tool that you can use to better understand your business and put together a strategy for it. But even so, why should you write a business plan?
There are many reasons why you need a business plan. The obvious one is that without a plan there’s no real business.
Also, you can use a business plan to monitor your business and stay on track. A plan typically outlines marketing goals, financial budgets/projections and overall strategy.
As your business grows, you can check to see if you’re meeting set targets and if not, you can stir your business in the right direction. Not to mention, you can also revisit your business plan to help you make informed decisions.
If your business requires little or no investment and you’re confident that you can get going without one, then sure, why should you write a business plan anyway? It’s not like you’re going to need it [sarcasm].
You need a plan but do you really need a 25+ page traditional business plan?
Whether it’s a piece of paper with your goals written in bullet points or a traditional 25+ pages plan, you better have one! Otherwise, how are you going to operate your business?
Now the process of writing a business plan can help you review all aspects of your business, such as revenue potential. You may even uncover things that you didn’t think of before.
You see, a business plan will normally include staffing and operation plans, which is something that many new business owners don’t necessarily think about at first.
Every new entrepreneur or business owner eventually gets to this question. So to drive the point home, let’s look at 3 concrete reasons why you need a plan.
1) To Provide a Road Map
By outlining your ideas on paper, you’ll gain a better understanding of your business and what you need to do, to run it more effectively.
A business plan can help you think of alternative future scenarios and set contingency plans. Therefore, you can come up with the best management plan, bringing you closer to your vision. It’ll help you set targets and objectives that’ll guide the future of your organization.
2) Secure Funds for Your Idea
This is the main reason why most people go to the trouble of preparing traditional business plans. It’s an important tool when it comes to securing funds.
You can’t ask investors or banks to give you money if you can’t show them a visual plan for making profits.
Many lenders require this to loan you money or invest in your company. Your plan will help them make informed decisions.
3) Manage Cash Flow
A business plan usually contains a cash flow section, under financials. You must manage the cash flow of your business wisely to ensure continued success.
It’s crucial to the survival and growth of your business. Many startups fail because of poor cash flow management.
Even the most profitable of businesses can fail if they don’t manage to pay their debts on time. So it’s important that you have a solid cash flow management strategy in place.
It’s also important to know the break-even point for your business. This is usually found in a business plan, which can help you adjust to meet your targets.
Furthermore, investors are also interested in your cash-flow projections because unlike school, in business, cash flow is your report card!
Ultimately, whether you should write a business plan or not, depends on your overall strategy and business model. As stated earlier, you may not need a traditional plan at all, but you must have a plan!