Why You Must Have A Business Plan
Even though you can run a business successfully without a business plan, your success is however surer if you have one. Apart from using it to achieve your business goals, business plan is one document you will be required to present in certain situations.
Here are the reasons you need a business plan for your business, and the situations you will be required to have and present one.
For Loan Application
If your business needs loan to start up or to expand its operation, you will be required by creditors to present a business plan. Bankers and other loan givers will be interested in reading your business plan, from which they will be able to determine if your business is viable or profitable or not.
Although they donâ€™t always ask for a business plan from existing businesses, however, it is still advisable to have one prepared and presented – it will increase your chance of getting the loan. For start-up businesses, business plan will be required to access Small Business Administration (SBA) loan.
From your business plan, they will be able to see if you have a management team with enough expertise and experience to run the business successfully. They will also observe your market potential and competition, and how well your product or service is uniquely positioned to stay on top of competition.
No doubt business plan is a document that enables creditors to assess the risk in a business with high degree of accuracy before offering it loans, therefore they will surely ask for it to assess any business loan application.
If you are therefore in need of loan to start or run your business, writing, or having someone write a solid business plan for your business that will satisfy the needs of bankers, venture capitalists, and angel investors, will definitely increase your chance of getting the loan.
To Win Equity Funding
If you need someone to fund your business and own part of it, then you must have a written business plan ready to show because they will surely want to read your business plan. They will want to know the kind of business they are getting into before putting their money down.
You see, nobody wants to lose their money, even if they have millions or billions of it. To be sure they are not going to lose their money in a bad business investment, they will demand to study your business plan. And that means if your business plan doesnâ€™t impress them you will not get their funding.
To Achieve Business Goals
The best way to achieve your business goals is to have a plan written for it. Writing a business plan for a goal or project will enable you to clearly define the goal and articulate the actionable steps you will follow to achieve it.
With such a plan, you have the road map to use to successfully reach the goal. You are also highly motivated and excited to continue working out the plan in the face of daunting challenges because the plan focuses your mind on the goal to be achieved and you know you will get there.
If you havenâ€™t been writing a plan for a goal that you desire to achieve, I encourage you to start now, you will be amazed just how much energy and enthusiasm you will feel pursuing it, and how much more you will be able to achieve.
To Assess Business Performance
A business plan enables you to periodically review and assess your progress in reaching your goal. You will be able to see if you are meeting target, if not, you will know why and then adjust necessary parameters.
If in your business plan you projected you would have 2,000 new customers in three months from newspaper and television advertisements, but you only got 1,000, you could sit down to find out why you couldnâ€™t meet the target. Your plan had given you the basis to ask questions and find solutions to move on to achieving the set target.
You will discover what works and what isnâ€™t effective, and so concentrate on the one that produces result. Without doubt, having a business plan allows you to remain on course as it enables you to identify and implement certain changes that are needed, rather than quitting in the face of little hitches.
To Define A New Business
One of the benefits of writing a business plan for a business idea before going ahead to starting the business is that it gives you strong clarity of the business. It allows you to have a deep understanding of the business â€“ the exact service it will be offering, who it will be serving, and how it will be offering its service.
With clarity of the purpose of your business established, success can be assured because you know exactly what you will be doing. A lot of small businesses fail in their first year because they were not well defined. In other words, the founders didnâ€™t sit down to think through the business and write a plan for it. If they had tried writing a business plan for it, they would have been compelled to define the purpose of the business.
To Detail Agreements Between Business Partners
Due to the thoroughness and specificity by which business plans are written, agreements between partners in a business venture are explicitly stated and explained.
Therefore, if you are going into partnership with other people to run a business, you will need to produce a business plan for the business, where everyoneâ€™s responsibilities as agreed upon by all will be unambiguously stated.
To Place Value On A Business
A well written business plan with realistic projections based on factual data can be used to put a value on a business, which is necessary if you are placing the business for sale or if the value of the business is needed for legal purpose.
To Assess Performance Of New Products, Promotion, Or Expansion
Writing a business plan for a new product launch, promotion or expansion project will enable you to measure your progress periodically, and make whatever changes you find necessary to reaching your goal, as you implement the plan. Without a business plan for these kinds of projects, there will not be a tool to gauge your progress and make corrections where necessary.
In rounding off this article, I want to emphasize the importance of business plan to starting and running your business successfully. Itâ€™s a road map and highly valuable tool that helps you achieve your goals. Itâ€™s a document you must have to run your business or projects for surer result.
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