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The Benefits of a Good Business Plan

Before you start your small business, start your business plan. Just as you wouldn't build a home without a blueprint, you shouldn't build a business without a business plan. Your business plan is your foundation for success.

This article will discuss a business plan's purpose, goals, and benefits. It'll also answer many people's questions when they contemplate writing a good business plan. Is it worth my time to write a plan? Yes!

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Why You Need a Business Plan

There are several types of business plans for different stages of a company's lifecycle and for different purposes and audiences. Each plan can help map out where you want the business to go and how you expect to get there.

Your plan needs to be inspirational. You are creating the vision and defining the path toward an exciting future. When you share your business plan with potential investors, bankers, and business partners, you want them to be as excited as you are.

Yes, a business plan includes research, data, and financial projections, but it also helps others understand how you will bring your entrepreneurial vision to reality. Taking the time now to craft a business plan will help you attract the support you need.

A Business Plan Helps You Look At Your Business Objectively

It's easy for prospective business owners to get caught up in their great ideas. Writing a business plan forces you to be objective rather than overly optimistic about your business. When you sit down and take an honest look at the components of your business plan — objectives, competitors, market conditions, market projections, and financials — you are better able to make rational decisions.

Perhaps your great idea doesn't stand up after that kind of review. A business plan should tell you the viability of your proposed new business venture. You want to know your chances of success before you sink time and money, or other people's money, into the business.

On the other hand, the planning process may give you a big green light. Armed with concrete goals, measurable objectives, market research, and financial forecasts, your business plan not only tells you where you are going, it tells you how to get there.

Business Plan Basics

A traditional business plan projects your company's growth for five years. You can view the contents of a written business plan, so you know what each section of your business plan needs.

So long as you follow the business plan outline, it will help you:

  • Define your business idea and company description in detail. This includes crafting a mission statement that describes who the company is and what your core values are.
  • Identify your potential customers. This helps you break down and understand their demographics to create an effective marketing plan and sales strategy.
  • Prepare your financial data. In order to draft a business plan, you have to think about business models, income statements, revenue streams, cash flow statements, and loss statements. This helps you determine if your business will likely be profitable and when you may see a Return on Investment (ROI).
  • Estimate startup costs. This includes how much you'll need to invest or how much financing you'll need from lenders like the Small Business Administration (SBA).
  • Attract financing with a solid business proposal you can show investors or lenders when applying for funding requests. A business plan with a table of contents is even more enticing to potential investors.
  • Devise a marketing strategy for reaching your target market.
  • Understand your market niche by conducting a market analysis of your competition. This is known as competitive analysis.
  • Anticipate potential market challenges. This may be based on Presidential elections, anticipated tax code changes, or competitive advantages.
  • Explain the business objectives and methods to employees and guide the hiring of new employees. This is helpful even for existing businesses.

Business plans bring every element of the business into sharper focus.

Picking the Right Type of Business Plan

You can always revise your business plan. One business plan template does not fit everyone's needs. There are different types of business plans for different business situations. You may be drafting a:

  • Startup plan
  • Acquisition plan for an existing business
  • Repositioning plan for new products or marketing
  • Expansion plan for new locations

Your business goals and the audiences for your business plan may not be different. You may be using your business plan to attract investors or seek funding. You may use it to convince a board of directors to approve an acquisition, or as a roadmap to set financial milestones or product line goals. Your business plan may be a form of strategic planning, helping you stay on track for business growth.

Business Plans Help Secure Investors

A written business plan is essential if you need capital from investors to help fund your business. A serious investor will only give your company money with a solid business plan that outlines the company's present and future financial health. Investors like predictability or a step-by-step guide on how you will succeed.

You must show investors that you are an expert in your field, have a solid grasp of the industry, and can excel in the current business climate. Think of your business plan as a resume for your company. You want to accentuate the positive while remaining honest about your abilities and experience.

The plan you present to angel investors and venture capitalists should highlight the value proposition of your business concept. You must research to offer a competitive analysis and financial statements/financial projections.

When seeking investment capital, your investment plan must look professional. You should have the plan bound in binders or folders, with charts and graphs for ease of reference. At the very least, have another person read it over for typos or grammatical errors.

Be sure to include a strong, inspirational Executive Summary. Investors and lenders read many business pitches in a year. They don't have time to read lengthy documents. They tend to read the Executive Summary and the financials before choosing to dig into the rest of the text.

Find Financial Plans That Work With Your Business Plan

Whether or not one of your objectives is to find financing to fund your business, you'll need an accurate analysis of financial figures for the success of your business. You'll need a breakdown of startup costs, a profit and loss forecast, and cash flow projections (at a bare minimum). You need revenue projections, breakeven points, and profit potential. Numbers should be double-checked by someone with professional experience.

When writing a business plan, be completely honest with yourself. The planning stage is no time to be overly optimistic about financial projections. Right now, you must determine whether it's fiscally feasible and at what pricing structure. All business is a calculated risk. The best way to minimize that risk is to emphasize the calculations.

No matter how you use your business plan, the simple act of starting a business plan acts as insurance against the risk that the business will fail.

Audiences for Your Business Plan

Investors are just one audience that may need to see your written business plan. The management and operations part of your plan needs to present an attractive partnership opportunity to draw in business partners, a talented management team, and skilled team members in key positions.

You may already be looking for potential customers, clients, or suppliers. Explaining the nature of your new business provides you with customers when you open the door. If you need a bank loan or business credit. In that case, you can present your business plan with solid financials to a business loan officer at the bank.

Get Professional Legal Help To Write a Successful Business Plan

As you start writing your business plan, you may identify areas where you need legal insights. Business lawyers regularly work with start-up entrepreneurs. An attorney can help you fill in the gaps. Contact a business and commercial law attorney in your state for sound legal advice.

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