What is the single most important document you need regardless of whether or not your business is a start-up or is preexisting? The answer is a business plan. In simple words, a business plan is a written document that describes your business – objectives, value proposition, operations plan, sales, marketing assumptions and financial forecasts.
Developing a game plan
The key to the success of a business is the perfect execution of a business plan. In order to achieve that, there are a few issues that need to be initially addressed during the business planning process. For instance, “What features are customers really looking for?” “How can we attract customers in a more cost-effective way?” and “Will customers buy our product and how much are they willing to pay?”
The business plan helps set objectives for managers. Good management requires setting specific objectives and then tracking and following up. As your business grows, you would want to plan and organize better, and communicate your priorities better. Be strategic. Develop a plan; don’t just wing it.
Knowing your market
Preparing a business plan forces you to analyze the market. It helps you to gain a wider and deeper understanding of your marketplace. Starting from the most important trends in your industry and the greatest threats to your industry to the potential growth of your target market for your product/ service. Is the market growing or shrinking? All these questions would have gone unanswered if it weren’t for a business plan. Furthermore, understanding your competitors is of utmost importance when you are in a business. All companies have competition in the form of either direct or indirect competitors and it is critical to know your company’s competitive advantages to survive in the market.
Every business aims to seek investment whether it’s a startup or not. In most cases, investors look for a business plan before they decide whether or not to invest. They’ll expect the plan to cover all the main points. When seeking investors, you will need to provide a detailed and tailored business plan to each and every potential investor. Each individual will have a different need from the company and therefore the business plan should seek to identify with those needs, drawing in the investor. A well-written business plan can help you convey these points to prospective investors, helping them feel confident in you and in the thoroughness with which you have considered future scenarios. Similarly if you are looking for a business loan from the bank, you need an excellent business plan to back up your application.
Keeping your calm
This is mostly common among entrepreneurs if your business is a startup. At times during your startup experience, we become so passionate about your ideas that you often lose sight of reality. At other times, you may be overwhelmed by doubt, fear, or exhaustion. When your emotions get the best of you, having a business plan lets you step back, and take an objective look at what you are doing and why, what you know for a fact and what you are trying to figure out. A business plan in this scenario helps to counterbalance your emotions.
For a startup, writing a business plan is the best way to test whether or not an idea for starting a business is feasible. How exactly will your business make money? This is a critical question that needs to be answered in writing, both for you and your investors. Hence a business plan is used to document a revenue model. Documenting the revenue helps to address challenges and assumptions associated with the model.
See? A business plan is essential.
Although writing a business plan can be time-consuming, it’s essential if you want to have a successful business. If your business doesn’t have one, may be it’s time to start working on one. However, a business plan is not a document you create once and store in your bottom drawer. It’s a living guide that should be developed as your business grows and changes. Successful businesses review and update their business plan when circumstances change.
Make sure to set yourself a reminder to review your business plan regularly.