What is the Importance and Advantages of a Business Plan?
When you want to know how to write a Business plan, then first you must understand the main importance of the business plan. When you are starting a small business or want to scale up the existing business, then a business plan is the tool that can help you to guide.
Some startups and small business don’t even give importance to a business plan. They straightway jump into starting a business.
But A business plan is an important strategic tool for Startups and small businesses. The business plan is a necessary tool to achieve short term and long term goals in business. It is the document that depicts the plans, goals, mission, and vision of your business.
What is a Business plan?
As per the definition of Wikipedia, “A business plan is a formal written document containing business goals, the methods on how these goals can be attained, and the time frame within which these goals need to be achieved.”
A business plan covers the nature of business and financial projections of the company. It describes the strategies it intends to implement to achieve the stated targets.
It entirely, this document serves as a road map that provides direction to the business. It provides clarity in your business operations, finance, marketing, human resource, manufacturing, and services goals. The purpose of the business plan is to formulate the business strategy for starting the business. It provides the insights and timeline of your business plan.
You can keep up to date your business plan every time you change the business goals.
The reasons and importance of business plan
#1. A business plan proves that you are serious about Business
A business plan is a document that depicts a detailed business plan, operations, and future plans. It shows the management, the investors and partners that you are serious about your business. It shows how you will develop business in the future. It shows your business idea to financers and lenders.
#2. Establishes Important Business Milestones
The business plan should effectively lay out the long term and short term business milestones that are most important to success in your business. You can prepare and plan your team to achieve these milestones.
#3. Business Plan can find your important competition areas
The business niche you have selected can have a number of competitors. You have to stay updated about their business strategies to be in the market. A Business plan keeps your focus on your plan along with your competitions. You can analyze your direct and indirect competitors.
#4. The business plan finds customer’s needs
As per your business plan, you can focus on your customers. You can define the focus area of your customer’s needs. In-depth customer analysis is important for a successful business plan.
#5. Analyze and assess the Business assumptions
Before starting to write a business plan, an inexperienced or newbie startups decide the plan on some assumptions. The business plan gives you an idea to rework previous business plan assumptions.
#6. Feasibility Study of your business
How is this business going to succeed in the future? Is this business a feasible opportunity for you? How the business will grow with its customers? What is the long term scalability of the business? All these questions can be solved when you write a feasible business plan.
#7. Creates the revenue model
Revenue model and profit money are like the blood of any business. It the most important thing you have to consider. How I am going to get the profit out of the products or services? How I am going to grow a consistent revenue model so that there won’t be a drought of money? Think and create solutions to the questions.
#8. Determines your financial needs
Does your business need capital? How much does it need? A business plan can give you a reasonable understanding of your investment needs for the current and future requirements. It helps you to determine cash-flows and break-even points.
#9. Attracts investors
Every business needs an investor. When you are scaling up the business to grow, you require the investors to support your functions. A good Business plan shows investors how they get returns on their investment. What is the ROI(return on investment) for investors?
#10. Reduces the risk of the wrong opportunity
Writing a business plan lessens the risk of opportunity you don’t wish to follow in the future. A business plan show where exactly the opportunity is available. It shows you what the best thing you can do get an opportunity.
#11. Determines and research your market
The business plan provides you a better understanding of your market. It shows you the image of SWOT(strengths/weakness/opportunity/threats) analysis. What are your market threats? Does the market give you an opportunity for the future?
#12. Attracts the employees and management team
Manpower is truly important to any business to run the day to day operations. Creating a business plan can inspire the employees and management team. They can stick to important action plan provided in the business plan.
#13. Attracts the partners
The companies who are willing to partner with you would definitely want to see what is your company about. They want to check the detailed profile of your company before partnering with you.
#14. Positions your brand in the market
Your brand image is more important when you are doing business. You can position your brand in the market with a detailed business plan. Your competitors and partners will benefit from the detailed approach of your brand. You have to mention the details of your brand positioning in a business plan.
#15. Judges the success of your business
When your business starts operations, then you can compare the success or failure of a business with the business plan. You can take measures as per the business plan, and take steps to rescue it.
#16. Deals with your business’s challenging conditions
You can try new ideas and plans to regenerate the business by writing or updating a business plan, when in adverse economic conditions or policies.
#17. Creates the marketing plan
A business plan is an important document for your marketing plan for a product or services. Marketing different products can have different plans. You can write available plans to promote the product or services in the market.
#18. Understands your human resource needs
What are your human resources needs? How you are going to deal with the shortfall of professional manpower, when in urgency? What can be your human resource policies when in operating a company?
#19. Finds the new opportunities
You can find new opportunities to find if your business can diversify in other fields. By consulting professionals, meeting with experienced staff can give you new ideas to venture a new business. Add a module in a business plan to avail new opportunities.
#20. A business plan can give control over your business
Developing a business plan gives you an insight into what is happening in your business regularly. What is working in the business and how you can improve the processes. The business plan gives you a sense of control of all your departments like finances, operations, debts, and marketing, etc.
Set yourself a reminder to review your business plan regularly.
Write an effective Business Plan
Now time to take action!! Now you have an idea about the importance of business plan. You can create a perfect business plan that matches your business ambitions. To write a business plan you need to have discipline, time and focus. The process may seem you time-consuming, difficult to follow. But these efforts will be rewarding you in the long run.
You don’t have to start yourself with plain paper. You can download a business plan sample pdf and guide to get started.
Get started Today
- Download a business plan template and guide.
- Visit our Services page to help you with your business planning process.
- Related Reading – How to write a business plan?
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