A business plan for a company is a road map. Would you start on a trip without a road map to your destination? Of course not. You would not get there in a logical manner, would you? The same is true for a business. You need a business plan if you have a start-up business because if you don’t, your business will never get off the ground or if it does, it will probably not succeed in the long run because you don’t know where you are going. If your business already exists, it will not accomplish its goals without a business plan because they are not clearly defined in your mind.
What is a Business Plan?
A business plan is probably the most important and useful document you, as a prospective or current owner of a small business, will ever compile. It is a written statement that sets forth your business’s mission and objectives and, in detail, how it is going to reach them. The business plan details the ownership and management structure of the business, the operational and financial details, and how it hopes to achieve its objectives. There are usually about ten sections in a business plan, but that can vary with the type of company.
Why do you Need a Business Plan
There are many reasons that you need to develop a business plan for your company. The first is that it helps you define where your company hopes to go in the future. It forces you to do the necessary research on your business. What is your target market and who are your competitors? How much can you make in sales in the next 3-5 years? Will you need help with financing?
Reasons for Preparing a Business Plan
There are many reasons for preparing a business plan, but here are five of the most important:
1. It provides a plan to follow in developing and operating the business. It keeps the business on target and helps the business owner take actions that are needed to achieve their goals and objectives.
2. It is a powerful tool to help you secure financing for your business. If you do need help raising money to operate your company, you will find that you have to have a business plan in order to apply for a bank loan, to draw in angel investors or venture capitalists, or to secure almost any type of financing. Investors simply won’t invest in a business that does not have a logical business plan they can look at. Financial institutions that loan money certainly won’t loan to a business that has no plan. Credit is too tight in the U.S. and world markets to take such a chance. In order to raise money for your company, not only do you have to have a well thought out business plan, but you have to turn that into a proposal or presentation for the investors or lenders.
3. The business plan can also serve as a communication tool. It helps you deals with personnel, suppliers, customers, providers of funds, and others stakeholders in the business. The business plan helps those stakeholders understand your operation.
4. It helps you, as manager, operate your business more effectively and efficiently and not get off track. The business plan actually helps you develop as a manager because it allows you to realize that you must study your industry’s competitive conditions, promotional opportunities, and situations that can help your business.
5. The business plan serves as a measuring device so you, as the manager, can see if you are meeting your goals, particularly your financial goals. It allows you to gauge your profess and evaluate any needed changes. Another reason that you need a business plan is that it provides you a road map to a satisfactory profit. That is every business person’s goal.