Starting a Business – Why Do You Need a Business Plan?

October 13, 2015

This is a question we get asked frequently, especially from entrepreneurs who have no funding issues to contend with. They have enough funds of their own or have the option to borrow from friends and relatives to start their enterprise. This is all great but the important thing being missed here is that a business plan is not made only to get funding.

 

Business Plans are Not Only for Funding

In fact, the main and most important purpose of the business plan is to have an understanding of how your business is put together, how it operates and where it is going. A business plan is used to monitor your operation’s progress, keep your goals in sight and generally keep things under control. And yes, it can also be used to further sales and recruiting as well as attracting investors when and if new funds are needed.

 

Financial forecasting

 

The Goal and The Process

You gain an enormous benefit even as you are writing the business plan, as the writing process forces you to review every little detail and see how it comes together into the big picture. You get to review your value proposition, marketing research, plan of operations, financial forecasts and payroll expenses. This process will make you notice connections that you might miss otherwise.

For example, you have a forecast to do a certain volume of sales, and plan to rent a modest space that turns out to be too small to store the necessary inventory. Or the opposite, you might notice that you are planning to hire more salespeople than your intended amount of customers requires. There are many things that can be overlooked without having a clear plan, and spotting those oversights in advance can save you hundreds or thousands of dollars.

 

Managing Timelines and Progress

Having a plan will allow you to carefully design your marketing and operational milestones, laying down a baseline for monitoring your progress. When you plan for something to happen by a certain date and it happens sooner, you can notice and ask if you overestimated or whether someone on the team made extraordinary progress (and needs to be rewarded for it). Or if the goal was reached later than planned, knowing which allows you to examine your operations and locate the source for the delay. Not having a plan at all will make you completely blind to those nuances, without which you cannot fine-tune your operation and adjust its course and development.

 

Be a Top Hirer!

Another great use for a well written business plan is to attract top talent. A serious employee will be interested to know what your company does, where it is headed and how it is going to get there. Many serious prospects will walk away from a company that does not know exactly what it is doing, just like you would not hire someone who is hazy about what their qualifications are and how they will contribute to your firm. Giving your prospect a plan that gives them an overview of your business will make them eager to get onboard.

The way that they react to the plan and the questions they ask regarding it will also give you additional information about them; how fast they get to understand your plan and see through its key issues.

As you can see, your plan can be sued as a fundraising tool, but it is only a part of its main value. The business plan’s main value is to help you manage yourself, your business’ operations and for recruiting top talent. In fact, those are all the reasons why getting funding without a plan is virtually impossible. The various lenders and funding institutions want to see you have a plan because having a plan is one of the cornerstones that you lay in order to build for success. You simply need a business plan to succeed.

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