It is important that you start (and ideally finish) a business plan before you start your business. The reasons are many, but a few of the most important ones have to do with clarifying the goals and feasibility of your business. To that end, here are four reasons to write a business plan before your business is in full swing.
1. No Business Is a Sure Thing
Many folks jump into a business venture because they and others are confident it is a sure thing. Success is guaranteed. Failure is very unlikely. Except…is it? How do you know? And even if you proceed with a business venture knowing that failure is possible, do you have a true grasp on why? Developing a business plan enables you to take a calculated risk.
2. You Cover Your Bases
When folks start a business, they may have considered many areas. Often, though, they forget one or two, and that comes back to hurt them later. A business plan is a comprehensive look that covers as many business aspects as possible. Aim for the following sections in your plan:
•Executive summary (a summary of the plan that outlines the purpose of the plan; write this section last)
•Marketing strategy and implementation
•Business organization and management team
•Financial plan and projections
For example, say that you did not write a business plan and so never performed a break-even analysis for the financial plan and projections section. Therefore, you never got a realistic picture of how much your expenses and sales revenue would be. If you’d had a better idea, you could have shifted your strategy to meet practical needs. When you write a business plan, you ensure coverage of areas such as
•The likelihood your business will make a profit (and when)
•The costs of starting up
•Where you might get financing
•How you should market and to whom
•Potential problems and how to resolve them
•The rationale behind business decisions
•How and where you will obtain the products and services your business deals in
Make no mistake, there are a lot of costs involved in running a business, some of which you may never have heard of. For example, you will need to buy inventory and pay for a website (and probably a mobile website). You need to figure out what to do about rent or mortgage payments, utility payments, how much you need to sell each month and so on.
3. You Generate More Revenue
A business plan requires market research, finding out information about your targeted customers, their demographics and their needs, wants and desires. You should identify the problem or pain point that your business can solve for them. By carrying out this research, you understand your customers better. You can offer products, services and customer service experiences that boost your bottom line.
A business plan also requires that you scope out the competition, and should help you develop a competitive edge. You’ll gain a better idea of what makes your offerings unique and what you could do to gain more customers, for example, choosing another location, going online only or offering 24-hour service.
4. The Business Gains Financing
It is possible that you do not need or want outside financing for your business. Perhaps startup costs are low and you plan to use your savings or credit cards. In many cases, though, you will need outside financing. Even when you do not, it is never a good idea to assume you have the financials covered. Investors require a business plan, and so do institutions such as banks and credit unions. You want to show them a solid business plan with realistic numbers. A business plan proves your competence to handle an investment or loan wisely, so don’t skip this essential step in running a business.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.