Importance of Business Plan

A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals.

A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. A business plan lays out a written road map for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.

Why is a business plan important?

A business plan is a very important and strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed, but it also helps them to achieve short-term and long-term objectives.

The 3 most important purposes of a business plan are 1) to create an effective strategy for growth, 2) to determine your future financial needs, and 3) to attract investors (including angel investors and VC funding) and lenders. Only your business plan can tell everything your company entails and proposed.

While a business plan is essential whether you start a Limited Liability or a simple sole proprietorship, not every entrepreneur sees the need for one. Many are reluctant to have their plan written down and there are numerous articles online claiming that the business plan is dead or irrelevant. Of course, not everyone agrees with that. A large number of business funding experts support the idea that having a good business plan is not enough. Even excellent business ideas can be useless if you cannot formulate, execute and implement a strategic plan to make your business idea work. If you are looking to raise funds from institutional investors and lenders, keep in mind that having a good business plan is extremely valuable. You should aim to have a well-documented plan that speaks for itself. It needs to be clear and easy to read and understand.

Four Reasons to Write a Business Plan

1. To raise money for your business

Potential investors or lenders want a written business plan before they give you money. A mere description of your business concept is not enough. Instead, ensure you have a thorough business and financial plan that demonstrates the likelihood of success and how much you will need for your business to be successful in the long term.

2. To make sound decisions

As an entrepreneur, having a business plan helps you define and focus on your business ideas and strategies. You not only concentrate on financial matters but also on management issues, human resource planning, technology, and creating value for your customer.

3. To help you identify any potential weaknesses

Having a business plan helps you identify potential pitfalls in your idea. You can also share the plan with others who can give you their opinions and advice. Identify experts and professionals who are in a position to give you invaluable advice and share your plan with them.

4. To communicate your ideas with stakeholders

A business plan is a communication tool that you can use to secure investment capital from financial institutions or lenders. You can also use it to convince people to work for your enterprise, secure credit from suppliers, and to attract potential customers.

Creating a business plan involves a lot of thought. You need to consider what you want to do and use that as a starting point. It does not need to be complicated. At its core, your plan should identify where you are now, where you want your business to go and how you will get there. Writing a good business plan does not guarantee success, but it can go a long way toward reducing the odds of failure. Besides, even if you are not looking for investment, your entrepreneurial plans will fall flat quickly without a plan to guide them.