Do you really need a business plan?

Entrepreneurs who are starting a new business often wonder, “Do I really need a business plan? Is writing a business plan really the best use of my time?” The answer to these questions is almost always, “Yes.” A business plan is an integral part of starting a new business.

Why should I write a business plan? If you’re like many entrepreneurs excited to get their idea off the ground, then the idea of sitting down and writing a business plan can cause some dread.

Why Business Plan is Important to Entrepreneur

And for good reason – the process of writing a formal business plan can pull a significant amount of your time and attention away from the actual business. “Do I really need a business plan? Is the tradeoff of my time and energy really worth it?“

Luckily there are a couple of studies that provide some insights into these questions. One study found that entrepreneurs with a business plan were:Reasons why you need a business plan

  • 2x more likely to secure a loan
  • 2x more likely to secure an investment
  • 49% more likely to grow the business

Other studies back up these results. In a 6-year study on Entrepreneurial Dynamics in the US, researchers found that entrepreneurs who write formal business plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs.

So why is this the case? What are the tangible advantages that a business plan can provide? 

What is the purpose of a business plan? We give our top 25 reasons why you need a business plan in 2021.

1. Vital to secure funding such as bank loans:

If you need financing from banks, a business plan is an absolute must. In fact, many consider a business plan to be a prerequisite before even discussing the terms of a loan.

Banks determine the feasibility of loans through a sophisticated method of analyzing the potential risks and rewards. Without a business plan, this analysis is not possible.

Similarly, many investors want to see a business plan as well. The plan allows them to verify the facts and data that support your business idea, and reassure them that you’ve done your due diligence, left no stone unturned, and are ready to begin scaling your new business.

A business plan is the road map for the company to secure fundings

2. Test the feasibility of your business idea

The best way is to write a business plan to test whether an idea for starting a business is to be feasible or not, other than going out and doing it.

Yes, it makes sense, a plan for the business is your safety net, as well as how to write a business plan step-by-step will save you a great deal of time and money if working through it reveals your business idea is untenable.

At the stage of marketing or competitive analysis, an idea for initiating a business is discarded, freeing you to move on to a better idea.

A business plan is important to test the feasibility of the business idea

3. You can solve issues before they develop:

Creating a business plan can help you identify problems that may arise in the future and stop them before they become a disaster. This will allow you to visualize success and get in front of problems before they become insurmountable obstacles.

4. It allows you to estimate your startup costs:

While creating a business plan, you can more clearly determine your startup costs. A strong plan can also help you wisely allocate those funds, get the most out of your money, prepare for future expansion, and save for unexpected costs.

           The business plan can be used to estimate the cost

5. You’ll be more organized:

Being organized is an important asset in your business toolbox. Having a carefully created plan from the beginning will organize your ideas and goals and allow you to truly understand how you want your business to work.

6. A business plan provides back up for loan applications:

When you need help with funding, a business lets you show financial institutions exactly what your company is all about, where it’s going, and all of the reasons it is in a position to succeed. It’s nearly impossible to get funding without one.

7. You’ll be ready if you ever decide to sell your company:

If you decide to sell your company, your business plan is a great thing to show potential buyers, because you can write in a well-thought-out exit strategy. A thorough, well-written plan will show buyers how far the business has come since the beginning, layout its potential for future growth potential and much more.

8. A good plan, help you to think about the future, strategically

A proper business plan is one of the most valuable tools to help you to reach your long-term goals, which gives your business direction, map out strategies to achieve your goals, defines your plan objectives, and also helps you to manage possible hump in the road.

If you prepare the business plan, it will help you to work out the goals you want to achieve and their strategies to achieve them, which means you can concentrate your energy and resources on what you need to do, other than spread out yourself too thin.

Your planning process helps you to consider possible bumps in the road and if they do come up, you put a plan in place to manage them better. Once you got a business plan, it is a better idea to regular review and updates it to:

  • Remind yourself of your priorities and goals
  • Check whether your strategies are working
  • Make the newest opportunities as they come your way
  • Adapt to any changes in your environment

9. To Impress Investors

Impress your angel investor! If you want to shop for your business, venture capitalists and you should have a solid business plan to attract angel investors.

Reasons why you need a business plan

Sometimes, a presentation may pique their interest, they will need a how to write a business plan step-by-step document that they can take away and study while before they will be decided to make an investment commitment. Prepare your business plan, it will be scrutinized.

Both investors and venture capitalists will need to conduct extensive background checks and competitive analyses to be sure that what written in your plan is true.

Masters says the business plan can act as a tool to attract Investors

10. A business plan formalizes your growth strategy

One of the biggest pitfalls of new companies is the overwhelming amount of decisions to make on a daily basis.

In fact, Facebook founder Mark Zuckerberg famously wears the same clothes each day in an effort to reduce the sheer amount of decisions he needs to make each day – by not having to choose what clothes to wear, he has one less decision to make, regardless of how small or inconsequential it is.

This same concept can be applied to a business plan. The business plan functions as the de-facto reference for your company’s major strategic growth decisions. With these decisions carefully thought out and confirmed ahead of time, it allows you to minimize the number of decisions you need to make on a day-to-day basis and focus on executing your growth strategy correctly.

11. A business plan can highlight new opportunities

It’s true that a business plan takes a lot of time and effort, but in strategic thinking as well as background research in competitor trends, industry trends, economic trends. Luckily, this effort can be an invaluable source of inspiration for alternative options to grow.

Take for example the famous chocolate manufacturer Hershey’s. The founder, Milton Hershey, had several failed business attempts before finding his footing in making luxurious caramel candies.

It was only after evaluating chocolate as an industry alternative to his products that he decided to make a strategic pivot and devote all his time and energy to making chocolate.

Had he not evaluated the industry dynamics, and instead focused solely on making caramels, he would not have identified this new business opportunity. In that regard, a business plan provides a holistic view of macroeconomic and industry trends, and in doing so provides a valuable tool to evaluate new and promising opportunities.

12. Determine your Business Objectives

When you are starting a business, you have many options, which include size, location, and definitely, the reason for existence. You can be able to determine all of those options and more aspects of the business with the help of your plan.

It makes you think through all of these areas that form the smallest thing, which comes from the main concept. That way, you can’t find yourself remembering that still your website isn’t developed or no way to ship your inventory. So well planned for your business objectives and start your own business.

13. Set Your Goals And Forecast Your Business’s Progress
 
Set your goals and forecast your business’s progress. By forecasting where your business will be in six months, one year, or five years, you are not only showing potential investors your plans, you are also setting up realistic milestones for yourself and your company.

A business plan is like a road map to success in setting and forecasting business goals

14. Help to make a major purchase

Set your goals and forecast your business’s progress. By forecasting where your business will be in six months, one year, or five years, you are not only showing potential investors your plans, you are also setting up realistic milestones for yourself and your company.

15. Easy to share aspects of your business

When it comes time to deal with professionals such as attorneys or accountants, the ability to quickly find and share selected aspects of your plan will show them that your business is a professional concern and the topic you are consulting about is important.

16. Monitor your business

Using an ongoing business tool, to monitor your progress and also check future scope. A proper business plan enables you to compare their business plan versus actual operational results.

And it allows you to properly see whether you are achieved your strategic, operational, and financing goals, as well as why you have or have not. Regularly monitor your business happenings will help you to identify your good and bad things in your business.

17. Make Business planning manageable and effective

A plan gives you control of your business. If you want to develop your business, the plan helps you to step back and look at what you did your business and what you can improve on.

If you have employees, the planning process will be a good opportunity to get their feedback on possible ideas and improvements. Writing and Researching for your plan gives you the chances to:

  • Study about your competitors, industry, and market
  • Write down where you are headed and where you are in the market exactly.
  • Understand the business finances, which include managing cash flow and determining the break-even point.
  • Identify challenges that may come across and work out strategies to avoid them and also try to overcome them.

18. See your business ideas will work and check sustainably

How to write a business plan step-by-step as well as outlining each aspect of your business. You can determine your idea is actually viable. An entrepreneur has paved the way for your success by choosing a suitable business model.

If you go for a B2B, affiliate business, or e-commerce store, which will have its own value configurations, target customers, and some core capabilities.

Capacity to meet the requirements of a business that will define its success rate. The sustainability of a business idea based on many factors, which include its supply and demand.

19. Establish business milestones and develop a game plan

Clearly lay out the long-term milestones of your business plan, that are crucial to the success of your business. If you are at a startup, the execution is everything, which means you have to set goals, priorities as well as to measure performance. You should identify the key questions and answers, such as

  • What features do customers want?
  • How much will they pay for our product?
  • How can we attract customers?
  • What features do customers want?

20. Position your brand

how to write a business plan step-by-stepIf you define your company’s role in the marketplace with the help of creating the business plan, which allows you to describe the business and position the brand to investors, customers, and partners.

You have to address your band and improve to become more famous in marketing among the investors, and financiers.

21. Help to deal with changing conditions

For instance, during difficult economic situations, if your present sales and operational models aren’t working, then you can rewrite your plan to define, try, and validate new strategies and ideas. Always try to make your business unique and plan a unique business idea.

 Professional plan writers says business plan is important to deal with changing conditions

22. Document your marketing plan

Reasons Why You Need a Business Plan

A well-documented marketing plan is essential to business growth. Also need to identify the questions and answer, such as,

  • How will you reach your customer?
  • What is your budget for advertising?
  • How will you retain them?
  • What price will you charge?
  • How is a plan to reach the customers?

23. Increase the Odds of success

Building a business is something that seems to be taken gravely. Nowadays, tons of start-ups fail, because the business owners fail to think before fallen into the unknown. Business needs a strategy, proper resource allocation, squeaky-clean priorities, and refined approaches.

24.Plan a strategic exit

In some critical situations, you might decide to quit your business venture. One solid business plan is the most efficient way to pay off your investment and make a substantial profit. A family law said ‘ Plan your divorce while still in love’, this same formula is to be applied in your business.

Many clients have co-founders as well as some are married to their business partners. Of course, you never assumed that partnership will fail, but life may happen. During the proceedings, we planned ahead of time; the dissolution can save a lot of emotional and financial pain in the process.

Writing a solid business plan can be time-consuming, but it is essential for your company to not only survive, but thrive, and gain expected profit and ROI.

25. Manage your cash flow

Reasons Why You Need a Business Plan

Healthy profit and cash flow management are key, here there is no secret. Often, clients come to me, they already have five to six-figure revenues per month.

The main reasons for many businesses ultimately fail is not because of a lack of profit or clients, because they break even.
A well-written business plan, which will help you to keep a follow of money, as well as prepare cash flow projections, can alert you are in trouble before it strikes and improves payables.

You can also able to invest in some necessities for your business, such as marketing to gain more money or tools, which are crucial for your company’s growth. If you need external funding, banks are wary of those who have the money today. Thanks to the business plans, because clients are able to get financial services from businesses, that could pay them and give them more time.

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