One of the most important aspects of starting a new business is the business plan. A business plan is a written document that contains future objectives, strategies, goals, and the methods to be implemented for reaching those goals. It details finances, marketing, and operational procedures to foresee the future of the business by focusing on the goals of the business. It shows a macro view of what to expect from the business, projected progress, market gaps, and ways to increase the business’s chances of success. It is also typically mandatory when borrowing funds from angel investors, venture capitalists, or banking institutions.
Business plans aren’t only for startups or securing funding, they are extremely helpful for any business. They can help identify weaknesses in products, processes, employees, or vendors, and business plans should undergo monthly reviews and revisions.
Make Better Informed Decisions
When running a business, you’re constantly making decisions regarding every aspect of the business. Even when you hire others to ease your workload by making decisions for you, you’ll still be involved with some of the more important decision-making. By no means is a business plan a crystal ball to see into the future, but it is an essential tool to making informed decisions with consideration of all aspects of your business. You can estimate potential outcomes of different situations using various criteria, and your business plan will help determine which products are more profitable and identify the products that need to be reevaluated.
Lenders Need Business Plans
If your business is just starting out, you’ll probably need some funding. Whether your lender is a bank, angel investor, or venture capitalist, all sources of funding will likely want to see a business plan. In that business plan should be projections of cash flow, future growth plans, competitive analysis, staff budget, market analysis, and layout of operations. This will help your lender determine whether or not they feel your business will likely succeed and to what degree.
Lenders want to make sure their money is not being wasted. A business plan shows that you are in control of your company with a well-thought-out plan that has factored in as many details as possible and also accounts for unforeseen possibilities. That will show that you have put considerable time and consideration into planning how the business will be run. The more planning that goes into a business, the less likely it is to fail. Banks and other investors usually require a business plan, so you want that plan to be as thorough as possible. Do your research, and find out what should be in your business plan, so you don’t leave anything out. You probably don’t want your lender stumping you with a question or issue you have not yet considered.
Setting Goals and Milestones
In order to fine-tune a business’s long-term strategy, there must be clear and rigid goals and milestones. A business plan can keep track of meeting those goals and milestones and possibly readjusting them. This holds true for new and existing businesses because a business plan shows what is working and what is not. It can also serve as a guide to help the team understand the desired direction of the business and help make decisions, especially if the boss is not available. Not only is it extremely important for a business just starting out, but it can also be useful to an existing business in determining future decisions regarding advertising, marketing, pricing, new product or service rollout, hiring, vendor choice, and so much more.
Avoid Miscalculations
You’ll never completely avoid making miscalculations and mistakes in your business, but a business plan can help spot them sooner rather than later when those miscalculations can potentially cause lasting damage. Are your products or services priced correctly? Do you have qualified staff working for you? Is cash flow where you hoped it would be? What is the competition? And most importantly, is there a reasonable market for your product or service?
A Guide for Staff, Employees, and Outside Service Businesses
A business plan provides a roadmap for service businesses such as law firms, marketers, managing consulting firms, and accountants so they can align their efforts in the same direction as the business owners. Everyone is working toward the same goals, and the plan will ensure that everyone on the team, as well as outside specialist firms, are doing what they should be in the way that top management wants it done.
A business plan is designed to allow a business to run as smoothly as possible with as few mistakes as possible. In addition, it lays out how the business is to be run with a clear-cut understanding and projection of the market, competition, trends, and the direction of the business owners. It is put together to ensure the business is successful and profitable, able to save money, and can be used to adjust future decisions and processes that will allow a business to grow.