Why do you need a Business Plan?
You already know the obvious reasons, but there are so many other good reasons to create a business plan that many nascent entrepreneurs don’t know about. So, just for a change, let’s take a look at the less obvious reasons.
Many extant entrepreneurs wrongly assume that having a business plan is only necessary when they are seeking funds. In fact, many legal services, financial advisers and even business consultants would want to see your business plan. A business plan should have to be considered as a living document, meaning there is no traditional final draft. As your business needs change and grow, your business plan needs to be updated.
You’ve decided to start your own business. You probably have a very clear idea (at least in your mind) of the type of business you will start. And, although your enthusiasm shows whenever you excitedly explain the concept to anyone who will listen, getting it into reality won’t happen solely based on your passion or enthusiasm. One of the very first steps any entrepreneur must take is translating an idea to paper in the form of a business plan. Preparing a business plan can be a long, time-consuming process, but it is vital to start a business.
Starting a business is a major decision that requires careful planning, including developing operational and growth strategies. This is true whether doing large or small business; every company should start with a clear vision and road map for fulfilling that vision. It is also true the business plan is used to raise money. Even if no outside funding is needed, there must be a plan for long-term financial stability.
The business plan usually projects three-five years into the future, forcing the entrepreneur to think through the goals for each year and how they will be met. This process also leads to the development of risk minimization strategies, an import requirement for long term business success.
Business planning may be arduous, but skipping this step can leave you uninformed about your firm’s place in the market. The type of information gathered during the planning process can help you foresee potential risks and develop strategies for dealing with them before they occur. Many owners return to their business plan even after their firm is up and running to help them refocus and chart a path for the future.
Putting effort into crafting a precise, professional, and informative business plan in your early start-up is essential to build a strong foundation for your company’s success. Keeping it up-to-date with current financial information, strategies and analysis, is crucial to keeping everyone on point as your business evolves.
Other important reasons for writing a business plan include the following:
- What would be initial cost to get start?
- Gives you reality check on profitability with required time.
- Determines target market & ways to reach.
- Gives you deep and clear market insights.
- Determines the competition, loopholes and untapped market potential.
- Encourages in-depth research and well-developed presentation of information that banks or investors require
- Starts business with careful operational and budgetary planning
- Encourages professional approach to business planning and presentation
- Builds the methodical approach to business start-up
- Helps the business owner with the bird view of business idea and business project objectively and with critical eye
Planning for success????
Before you start writing, do some preparation. Here are some of the main questions to focus on in the initial non-financial sections of your plan:
What is the purpose of your company?
Creating a mission statement will help you focus on why your business exists in the first place. Some statements lean towards the inspirational, but others simply describe the product or service that is being offered.
Who are your potential customers?
Your marketing strategy will answer the question of who will buy your product or service. As much as possible, categorize your customers within separate market segments and analyze their particular behavior. What motivates them to buy? what they do? How much money do they want to spend? How do they respond to different types of marketing?
Who are your competitors?
Gather as much information as you can about other companies in your sector to prepare your competitive analysis. These are the folks that you will be studying to see how your business can do. Make sure you list both direct and indirect competitors, describe their strengths and weaknesses, and detail their pricing plans. Think about how you will differentiate yourself within this group.
How will you run your business?
In your description of operations, be prepared to set out exactly how you plan to manage your company on a day-to-day basis, as well as the physical necessities involved.
Start-up expenses
How much will it cost you to start your business? Think about expenses such as rent, expense on equipment, any licensing and registration fees, initial inventory and Consulting fees & so as many.
Operating expenses / Working Capital
Once you’re up and running, how much will you require on a regular basis to keep going each month? Consider costs such as employee salaries, loan payments, materials purchase, storage fees, utilities and maintenance.
Cash flow
This section will help to show you how much cash you will have access to on a regular basis – and determine whether you should seek additional financing.
Maintaining objectivity can be difficult during business planning because entrepreneurs are :
- Emotionally involved in the process
- Myopia of business & markets
- Non-realistic projections about sales, finance & Markets growth
- Inexperienced in business planning and writing
These are the top reasons that potential business owners prefer to use professional consultants. Professional plan developers approach the process with complete objectivity.